Archives: Feature Articles

Momentum Grows for Fee-and-Dividend Over Cap-and-Trade

14 February 2020 | JPMorgan Chase and Goldman Sachs this week became the two latest financial behemoths to back a “fee and dividend” approach to reducing greenhouse gas emissions that an organization called the Climate Leadership Council has been advocating since 2017.

The proposal is one of at least two that are gaining momentum in Washington, with the second being the Energy Innovation and Carbon Dividend Act advocated by the Citizens Climate Lobby.

Cap and Trade vs Fee and Dividend

In cap-and-trade, the government establishes a cap on greenhouse-gas emissions and then makes people who exceed the limit purchase either allowances or offsets. Allowances are purchased from the government, while offsets funnel the money into technologies that absorb greenhouse gasses. Cap-and-Trade has the advantage of funneling money into practices that reduce emissions or even remove greenhouse gasses from the atmosphere, but there’s a downside. Namely, it will make fossil-fuel energy more expensive, which means it will drive up energy prices in the short term until we finally transition to cleaner, cheaper sources.

In a “fee and dividend” approach, the government imposes a fee on on greenhouse-gas emissions, but instead of funneling the money into emission-reductions, it sends it back to citizens in the form of a dividend. As a result, people pay into the system based on how much fossil-fuel energy they consume, but but every single citizen gets the same dividend back.

The idea has been around a while, and California already funnels some money from its cap-and-trade program into poor communities.

More on Bionic Planet

For a deep dive into the Citizens Climate Lobby proposal, check out Episode 55 of the Bionic Planet podcast, featureing Daniel Palken of the Citizens Climate Lobby. Bionic Planet is available on all podcatchers, including iTunes, TuneIn, Stitcher, and on this device here:

Diverse Support, Both Industrial and Political

The Climate Leadership Council is a decidedly top-down affair that was launched in 2017 by Republican stalwarts like former Secretaries of State James Baker and George Schultz. It started with a bang and is backed by a diverse array of industry and NGO groups, including five oil and gas supermajors (BP, ConocoPhillips, ExxonMobil, Shell, and Total), the largest solar company in the US (First Solar) and three of the country’s largest environmental NGOs (CI, WRI and WWF).

The Citizens Climate Lobby, on the other hand, is a bottom-up affair launched in 2006 by philanthropist Marshall Saunders. It currently has nearly 600 chapters around the world.

Both groups have had success in building bilateral support for a fee and dividend approach to meeting the climate challenge, although neither’s proposals were included in the gaggle of Republican bills that emerged in the House of Representatives this week.

Coronavirus Is Bad, But The Green Swan Is Worse

3 February 2020 | China’s stock market plunged 8 percent on Monday after the coronavirus shuttered half the country, including the factories of Ford, Apple, and Tesla. The country’s GDP growth is expected to fall by a third this quarter even if the outbreak is contained, and publications from the Financial Times to the Wall Street Journal warned of economic contagion following in the virus’s path as disruptions in global supply chains translate into slower growth around the world.

We can’t say they didn’t warn us – “they” being experts like Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization (WHO). He’s long said the world is ill-prepared for a global pandemic, and on Monday he used the outbreak to remind us that an ounce of prevention is worth a pound of cure.

“For too long, the world has operated on a cycle of panic and neglect,” he said. “We throw money at an outbreak, and when it’s over, we forget about it and do nothing to prevent the next one.”

We do the same with storm-ravaged cities after they’ve been pummeled for the third time in a decade by once-in-a-century hurricanes. We treat them as isolated natural disasters instead of interconnected unnatural events caused by the extra energy that greenhouse gasses have trapped in our atmospheric system – as much energy as four atomic bombs exploding every second, according to the latest emissions gap report.

Swans of a Different Color

The outbreak of coronavirus is what derivatives trader Nassim Taleb would call a “black swan,” which is a low-probability, high-impact event that disrupts financial markets and upends people’s lives. In his book by the same name, Taleb explains that Europeans long defined swans as white birds with long necks until they came upon black swans in Australia. The discovery of black swans forced a fundamental change in the definition of what constitutes a swan.

Climate change is a swan of a different color: a green one.  Green swans are risks we humans create for ourselves by pumping contaminants into our air and water, destroying our ecosystems, and destabilizing our climate. They’re different from black swans in that their inevitability increases predictably, even as the specific outcomes become less predictable and more dangerous.

The concept has been around for a while, but last week the Bank for International Settlements (BIS) published an e-book called “The Green Swan: Central Banking and Financial Stability in the Age of Climate Change,” which summarizes the thinking to-date and tries to offer ways that central banks can help address the risk (short answer: they can’t).

Published last Monday, the 115-page book offers a detailed but surprisingly readable summary of both physical risks (climate-induced unnatural disasters or the spread of disease) and transition risk (mass bankruptcies of companies that failed to adapt) as well as the ways banks have traditionally assessed both. It’s not for the faint of heart.

“Climate catastrophes are even more serious than most systemic financial crises,” the authors write. “They could pose an existential threat to humanity, as increasingly emphasized by climate scientists.”

Probabilities vs Scenarios

Black Swans gunk up the financial system because banks and insurance companies use historical data to calculate risks, and historical data doesn’t account for the new variable.

“As a result, the standard approach to modeling financial risk consisting in extrapolating historical values…is no longer valid in a world that is fundamentally reshaped by climate change,” the authors write. “In other words, green swan events cannot be captured by traditional risk management.”

Risk managers, of course, aren’t stupid. Most have moved beyond historical modeling and begun incorporating more forward-looking scenarios into their planning. This, however, involves trying to figure out how complex systems like society are going to respond to other complex systems like an upended global ecology. There are just too many places where projections can run amok, as a 2015 paper called “Global non-linear effect of temperature on economic production” made clear. The authors, nonetheless, took a stab at it and concluded that the global economy will probably shrink by 23 percent in the next 80 years if we don’t fix the climate mess.

“Our key conclusion is that, despite their promising potential, forward-looking analyses cannot fully overcome the limitations of the probabilistic approaches discussed in the previous chapter and
provide sufficient hedging against ‘green swan’ events,” the authors write. “Climate-related risks will remain largely uninsurable or unhedgeable as long as system-wide action is not undertaken.”

Deaf Ears and Dogged Denial

If it sounds like you’ve heard this before, you probably have. After all, economists have been pondering climate risks since long before Nicholas Stern published his exhaustive 2006 “Stern Review on the Economics of Climate Change.” That 700-page analysis dove deeper and more exhaustively into the state of things back then, and it pegged the cost of cutting emissions at 1 percent of GDP if we started acting at the time, while the cost of letting emissions rise would be 20 percent.

We didn’t listen, and in January the World Economic Forum’s 15th Global Risks Report identified environmental degradation as the single greatest threat to global prosperity.

If one theme is clear in all of these analyses, it’s that adaptation is not an option. The only way to confidently address the climate challenge is to reverse it, and quickly. Every penny we spend now will amount to a fortune saved for our children.

How to Plant a Trillion Trees and Get Real Climate Results

This story is cross-posted on Viewpoints, the Forest Trends Blog.

31 January 2020| The world is rallying around planting trees for climate action. Even President Donald Trump is on board, announcing last week at the World Economic Forum that the US would join the One Trillion Trees Initiative.

In the next ten years, you will likely see the largest effort in history to regreen the planet. The United Nations has declared 2021-2030 the Decade on Ecological Restoration. Initiatives including the Bonn Challenge, the African Forest Landscape Restoration Initiative, and dozens of corporate and government commitments will replant, restore, and preserve hundreds of millions of acres of land around the world.

These efforts contribute to keeping global warming under 1.5° C. Climate scientists have shown that reducing emissions is no longer enough to stay below this threshold. We need negative emissions – to actively remove carbon from the atmosphere in addition to our already-planned emissions cuts.

Investing in natural carbon sinks like forests is our best – and currently our only – strategy for affordable carbon removal. Natural climate solutions like restoring and preserving forests and other high-carbon ecosystems, switching to climate-friendly agriculture, and practicing sustainable forest management can cost-effectively achieve more than 37% of the emissions reductions we need to stay under 1.5° C.

It’s important to point out that tree-planting is not our only natural climate strategy. A major new study released this week shows that protecting existing tropical forests is still the largest pathway we have for cost-effectively mitigating emissions.

Nor can we forget that history is littered with failed tree-planting projects. China, home to some of the world’s largest reforestation campaigns in history, lost as many as 86% of trees planted between 1952-2005. Millions of trees have been planted in the Sahara since the 1980s, but it still isn’t green.

How do we make sure this tree-planting movement is different? Forest Trends has worked for nearly two decades in the Amazon planting trees as part of larger agroforestry and forest management systems developed hand-in-hand with indigenous peoples. Here are some basic guiding principles for making smart investments in forests that we’ve learned.

Learn to think at the speed of a tree, the breath of a forest.

When forests and other ecosystems are damaged, they take decades or even centuries to fully recover, if they ever do. For that reason, it is vitally important right now to protect existing forests and healthy working forest lands than to plant new trees. The best way to maximize carbon sequestration, water filtration, flood regulation, wildlife habitat, and the other benefits trees give us is to keep existing forests healthy and intact. Then, we can build on this foundation through wise restoration and reforestation efforts.

Plant the right species in the right place, and that remember a forest is more than just a stand of trees.

Many tree-planting efforts fail or have unintended consequences because they create forests where forests didn’t exist before – for example in grasslands and arid areas. You also need good science to understand how ecological functions interact or pose trade-offs. For example, planting trees can reduce local river flows (at least initially) but sometimes has the opposite effect during the dry season. And the outcome depends a lot on previous land uses (for instance if the land was previously plowed for farming), degree of soil disturbance, and the eco-region we’re working in. Meanwhile, planting non-native species can hurt biodiversity.

For reasons like these, projects need to take a whole-ecosystem approach. When we think about forests here at Forest Trends, we see them inherently multifunctional: a virtual (supermarket) of products and services. With a single conservation investment in a forest, you can sequester carbon, purify water, recharge aquifers, absorb floodwaters, provide a home for wildlife, and ensure a sustainable supply of wood fiber, food, and other products for people. When we plant trees and maintain forests, we need to capture and monitor these other services (carbon, water, biodiversity) and drive our economic system to value these precious assets.

Partner with local communities to ensure that seedlings survive and communities benefit from projects.

“There is a saying in forestry: It is not about trees, it is about people,” Nestor Gregorio, a research fellow at Australia’s University of the Sunshine Coast, told the Washington Post. “If people will find trees important, then they will look after the trees.”

It’s like birthing and successfully rearing a child. Tree-planting projects succeed when locals have the right decision-making power, skills, and incentives to protect their forests. Tree-planting projects fail when NGOs, companies, or other funders parachute in, plant trees, and leave.

We have seen that supporting indigenous and forest communities to thrive in their homelands is one of the most effective safeguards against forest loss. But these communities need effective partnerships to keep their forests standing. They also need support in creating sustainable economic enterprises that provide alternatives to deforestation.

Be humble.

We are changing global ecosystems so drastically (the Amazon forests may soon ‘tip over’ into savannah thanks to climate change and mega-scale conversion to agricultural production; some ecosystems may never recover in the Australian bush after this winter’s fires) that the analogs we have used to understand system change in the past no longer apply. We are seeing more novel ecosystems, and we can’t rely on the past for much guidance on how our restored and newly planted forests are going to behave. For example, climate change is already changing that rainfall patterns in many areas and we need to take that into account when, for instance, selecting the right species to plant. We should have an eye on restoring the ecological functions, but not necessarily the same ecosystems.

We cannot fix climate change with a one-and-done push to plant a trillion trees, but a global forest restoration effort can teach us a lot about respecting the incredible complexity and richness of our planet and its ecological systems.

Plant a tree but grow a green economy.

We are losing forests around the world because our economy values a tree more when it is cut down or when a forest is converted for timber more than when it is part of a standing forest. Forest Trends’ mission is to demonstrate that there is value in both. Until we embed sustainability into our economy, tree-planting will be a Band-Aid on a deeper problem.

As Canada Contemplates Biodiversity Offsetting, Your Views Matter

29 January 2019 | Canada has quietly implemented carbon pricing across the country, both through longstanding provincial cap-and-trade programs and the more recent federal Greenhouse Gas Pollution Pricing Act of 2018. Now, says David Poulton, both the federal government and several provinces looking to expand the use of biodiversity offsetting in areas were development and environment clash.

“People don’t realize that we’ve been experimenting with offsetting for decades,” says Poulton, who runs the Alberta Land Institute at the University of Alberta. “We’ve had a federal program for offsetting damages to fish habitat since 1986, but the program has – if you’ll pardon the pun – floundered.”

“The fisheries program had very loose guidelines and very little accountability, and it developed quite a poor reputation,” says Poulton. “But in the last five or six years, there’s been a consistent effort to upgrade it and make it more principled, and more people are beginning to understand the role that market mechanisms, and especially offsetting, can play in balancing development with water protection.”

Several Canadian provinces employ offsetting as a wetland conservation tool, as does the federal government on lands within its jurisdiction.  But the use of offsetting is expected to expand as both federal and provincial governments take an increased interest in the policy tool.  Offset credit banking is being considered by a few governments, according to Poulton.

As interest grows north of the border, Poulton is encouraging US participation in Land Use 2020: A Place for Biodiversity Offsets, which takes place in Banff, Alberta, from May 26 through 28, 2020.  “We have things to learn from the experience of the U.S. and other countries, and we think we have lessons to offer in terms of the unique challenges of offsetting in Canada’s geography,” says Poulton.

The deadline for early-bird registration and for submission of abstracts by those wishing to present is January 31, 2020.

Nearly Two Dozen Countries Can Soon Absorb More Greenhouse Gas Than They Emit

27 January 2019 | Most countries are clearly slacking in the global effort to meet the climate challenge, but Costa Rica isn’t among them. Indeed, while global greenhouse-gas emissions have spiraled dangerously upward over the past decade, this tiny nation has reeled its emissions in by reviving its forests and shifting to renewable energy. Last year, the government unveiled a 30-year plan to slash emissions 45 percent in the next decade and to achieve zero net emissions by 2050.

It aims to achieve this in large part by doing more of what it’s done already – namely, pushing the envelope on “natural climate solutions” (NCS) that boost the carbon-storing potential of forests, farms, and fields.

There’s plenty of reason to believe Costa Rica will not only meet but beat its goals, and a new paper published today in the journal Philosophical Transactions of the Royal Society B offers one of them. Entitled “National mitigation potential from natural climate solutions in the tropics,” the paper found that roughly half of all tropical countries can reduce their emissions about 50 percent by embracing NCS strategies, and that many of these countries can remove more greenhouse gas than they emit while boosting their economies.

At a carbon price of $50 for every metric ton of CO2 removed from the atmosphere, for example, Costa Rica can go beyond net-zero and end up pulling four times as much greenhouse gas out of the atmosphere as its entire economy emits right now. At that same carbon price, the Central African Republic can use NCS strategies to boost its GDP a staggering 90 percent.

Hear the Full Interview With Bronson Griscom

You can hear the full interview with lead author Bronson Griscom on Episode 54 of the Bionic Planet podcast. Available through all major podcatchers and on this device here:

Different Countries; Different Scenarios

Authored by scientists from 17 organizations, the new paper looks at 12 natural climate solutions across 79 tropical countries and identifies activities that can reduce carbon dioxide emissions by 6.6 billion metric tons per year – ore more than all of the emissions generated by the United States – at a price of $50 per ton or lower.

“We found a wide variance among countries in the types of interventions that can deliver results,” said lead author Bronson Griscom, Senior Director of Natural Climate Solutions for Conservation International. “The Solomon Islands, for example, can make tremendous gains by managing their production forests more effectively, while Kenya can make tremendous gains by doing the same with agriculture.”

These 23 countries can achieve carbon neutrality by ratcheting up existing natural climate solutions that can be deployed at a cost of $50 per metric ton or less. Some can even become net carbon sinks. Source: National mitigation potential from natural climate solutions in the tropics

Peak Land, Climate Change, and the Restoration Economy

The paper comes at a critical moment in human development, with humankind now actively managing more than half of Earth’s ice-free land.

“The human footprint is expanding, and the population is still growing, but the rate of population growth is declining,” says Griscom on an episode of the Bionic Planet podcast scheduled to drop on January 28. “Meanwhile, our technology – our practices for agriculture – are continuing to improve so that we can produce more food per hectare from one decade to the next.”

We have, he says, the know-how to feed the world and reduce our footprint at the same time, but it comes as climate change threatens to decimate the world’s living ecosystems.

“This is hundreds of years in the making, and we’re at this inflection point now,” he says. “Ecotopia is out there, but so is climate change with all its potential tipping points in ecosystems and looming mass migration due to societal collapse.”

It’s an all-or-nothing proposition.

“We have all of these solutions in front of us, and we have this ticking clock,” he says. “We know what to do, and we have the means of doing it, but we have just a decade to do it.”

The Decades Ahead

With so many different countries and so many different economies, he sees a phased approach where some countries move now and others follow in their wake.

“Some countries have the resources and governance to move right now,” he says. “The idea is, ‘Let’s help those countries move quickly now, and let’s invest this decade in helping those other countries to prepare for major actions.'”

For the full interview with Bronson Griscom, be sure to check Episode 54 of the Bionic Planet podcast, which will drop on January 28 and is available on iTunes, TuneIn, Stitcher, and all major podcatchers.

COP 25 Revisited: What Happened?

This analysis was prepared and published jointly by Climate Focus and Atlas Environmental Law Advisory. You can view the original here. 

Highlights

  • COP-25 was tasked with finalizing the rules of Article 6 of the Paris Agreement, i.e. the rules of future international carbon markets, as well as reviewing and strengthening the Warsaw International Mechanism for Loss and Damage, and concluding various finance-related matters. However, despite an almost two-day delay in closing the conference, delegates failed to deliver on most of the pending issues.
  • While the Madrid COP had a relatively ‘light’ negotiation agenda, the Article 6 negotiations proved to be both promising – due to the degree of compromise negotiators from all sides offered at one time – and frustrating as negotiations ultimately collapsed. The lack of agreement points towards a sobering loss of momentum in the implementation of the Paris Agreement.
  • The Chilean Presidency and its Spanish partners invested their political capital to mobilize support for new and more ambitious Nationally Determined Contributions (NDCs) that are in line with science and reflect the urgency of climate action. In the end, the adoption of a set of decisions under the banner “Chile Madrid Time of Action” did little more than repeat the existing decision texts. The document helped save face but failed to produce a fresh and meaningful collective effort.”
  • The lack of ambition – in particular, the absence of clear statements supporting strong mitigation action, stands in contrast to the increasing demands from the public for countries to take action. However, considering that the negotiations happened against the backdrop of the US withdrawal from the Paris Agreement, a surge of populist governments around the globe, and social unrest in many Latin American countries, and that the conference was an “in-between COP” with a light negotiation agenda, media and observers may have arrived in Madrid with unrealistic expectations.
  • Hope comes from civil society and businesses that are increasingly cooperating on climate action. Businesses that recognize their responsibility to engage in mitigation action published ambitious announcements in and around the Madrid conference, and, in doing so, alleviated – at least partly – the frustration left behind by governments that were unable to meet the expectations coming from inside and outside of the negotiation rooms.

22 January 2020 | If proof was needed that multilateralism is under fire at the turn of the decade, climate change negotiations would make useful demonstration material. The 25th session of the Conference of the Parties to the UNFCCC (COP-25) is the COP that no one wanted:

The Brazilian government – which changed leadership after the Presidential elections in 2018 – withdrew its offer to host the conference. Chile, which took over from Brazil, felt it needed to cancel the conference following the massive protests across the country and the ensuing political turmoil. In the end, Spain offered to host COP-25 and produced something close to a logistical miracle in less than six weeks.

However, the impressive organizational capabilities of the city of Madrid and the Spanish government did not manage to dispel the clouds that hung over the conference. Demonstrations of hundreds of thousands of people, strong media coverage, and recent reports of the Intergovernmental Panel on Climate Change (IPCC) had created expectations that the meeting, even if it had delivered on its agenda, would have hardly been able to meet.

Instead, the Madrid COP may be remembered as the COP that brought fame to a little-known procedural rule that gives cover to political procrastination. Rule 16 of the provisional UNFCCC rules of procedure is applied when Parties fail to agree and allows for pending issues to “be included automatically in the agenda” of the 2020 COP (COP 26). Rule 16 was applied 15 times in Madrid, an indication of a lost opportunity and a heavy cargo on the way to COP 26 in Scotland.

Ambition

Ambition, or, better yet, the lack thereof, has become the mantra of international climate negotiations. Repeated over and over again, ‘ambition’ is both a boon and a bane of the Paris Agreement. In contrast to the Kyoto Protocol, which determined its end goal by establishing a cap on developed countries’ greenhouse gas emission, the Paris Agreement relies on a mix of continuous self-assessment and collective bargaining to bring it on the path towards meeting its ambitious goal of limiting global heating to well below 2℃. The ambition of the Paris Agreement depends on the accumulated ambition of all NDCs, which countries ‘may at any time adjust […] with a view of enhancing its level of ambition’ (Art.4.11 PA). This means nobody is really ever off the hook.

In Madrid, the communication of new NDCs was not on the agenda. It is not until this year that countries with an NDC timeframe until 2025 have to submit new NDCs. Countries whose current NDCs are already valid until 2030, have to re-‘communicate or update’ their NDCs next year.[1]

So why the whole drama in Madrid?

First, the Chilean government had hung its reputation on raising ambition. It had launched the “Climate Ambition Alliance” [2] at the UN Secretary-General’s Climate Action summit in September 2019, with the end to accelerate the transformation needed to meet the goals of the Paris Agreement. Chile made various attempts during the COP to convince governments to come forward with pledges and announcements of additional and stronger climate action, i.e. increase ‘ambition’, in anticipation of a new round of submissions of NDCs in early 2020. The Chilean Presidency and the UNFCCC secretariat had created high stakes when they expected COP-25 to be a ‘launchpad’ for high climate ambition.

Second, people outside of the negotiation rooms have unmistakably understood the message of climate science and the inadequacy of government actions. Fridays4Future, Extinction Rebellion and many other movements have rallied behind Greta Thunberg and her message, and they are becoming more vocal every week. Government inaction thus cannot hide any longer, and the growing civil society movement places it center stage.

Third, the discussions in Madrid made it clear that countries have very different understandings of ‘ambition’. For developing countries ambition is not only limited to mitigation. They see it as a function of finance, technology transfer and capacity building. Without a clear commitment from developed countries to provide support, they will not consider raising their NDC ambition in 2020. Developed countries in turn point towards the responsibility and ability of countries to do what stands in their power to reduce emissions.

Fourth, as countries move towards implementing their NDCs, it is becoming obvious that national political dynamics, spanning from climate-skeptical populism to unwillingness to confront national lobbies, are making additional action difficult for many countries.

The negotiations of the “Chile-Madrid Time of Action” documents – the main outcome of COP-25 – stood in line behind failed attempts to raise ambition in advance of COP-25. The draft documents – one negotiated for each of the treaties: the UNFCCC (under the authority of COP), the Kyoto Protocol (under the authority of COP serving the Kyoto Protocol (CMP)), and the Paris Agreement (under the authority of COP serving the Paris Agreement (CMA)) – saw some back and forth, sinking first to low points and eventually reaching slightly higher ground. Instead of merely reiterating the need for ambition, the final decisions “re-emphasizes with serious concern the urgent need to address the significant gap between the aggregate effect of Parties’ mitigation efforts in terms of global annual emissions of greenhouse gases by 2020.” [3] The UNFCCC text also stresses the relevance of both the “pre-2020 implementation and ambition” and the different initiatives and partnerships for global action. Moreover, it references the role of non-Party stakeholders in “contributing to progress”, as well as – bowing to the new enthusiasm by activists and impact funds alike for climate action around forests and agriculture (‘nature-based solutions’) – the “essential contribution of nature to addressing climate change”. While these are all pertinent and useful aspects, negotiators barely saved face.

The truth is, almost all countries fall short of taking climate change as seriously as they should and refuse to do what is in their ability to confront the global climate crisis. Madrid has confirmed this point.

Since the adoption of the Paris Agreement, there have been considerable efforts to make NDCs consistent and comparable. Negotiators have tried to establish ‘common time frames’, referring to the number of years covered by an NDC. The Paris Agreement left the matter undecided, but mandates Parties in Article 4.10 to consider common timeframes. It is of considerable importance, however, in particular with respect to the upcoming 2020 update of NDCs, but also more generally as countries debate whether NDCs should be updated every five- or ten-years, or apply different time frames for adaptation, finance and mitigations. Collective ambition would have seen a boost had the Madrid COP clarified that all Parties should submit a fresh (enhanced) NDC in 2020. Instead, the relevant decision (CMA) did not modify existing ambiguity and deferred the decision to the next COP. Rule 16 was applied.

Finance

Finance (like ambition) was omni-present as an underlying topic, providing a nuance to almost all negotiation topics. Whether shaping the discussions on loss and damage, coloring the talks around markets or guiding the debates on pre-2020 action and updated NDCs, finance is an essential pre-condition for the cooperative spirit that is needed for countries to agree on technical matters.

The overall disappointment on the reluctant and inefficient flow of finance unites developing countries, who see the lack of funding as “lack of progress on the pre-2020 agenda.” In the view of most developing countries, finance should come in the form of government-to-government transfers, while developed countries count public and private transfers as equally valid contributions to the USD 100 billion per year Copenhagen finance goal. While this goal is yet to be met,[4] developing countries pushed for a potential new and amended long-term finance goal in Paris. Agreement was postponed, Rule 16 applies.

The official discussion around finance focused on guidance for operational entities of the financial mechanism of the UNFCCC and the Paris Agreement, the Green Climate Fund and the Global Environment Facility. Developing countries expressed frustration with the slow and cumbersome operations of the Green Climate Fund, and the decline in climate allocation in the latest Global Environment Facility replenishment. The COP provided guidance to the operating entities of the financial mechanism (GCF and GEF) and tasked the Standing Committee on Finance to conduct additional analytical work, including mapping data availability and gaps by sector, assessing climate finance flows, and presenting information on the determination of the needs of developing country parties related to implementing the Convention and the Paris Agreement.

Interesting in this context is the newly convened Coalition of Finance Ministers for Climate Action, which laid out the “Santiago Finance Plan“. Under the plan, finance ministries commit “to facilitate a trajectory of smooth transitions toward that goal and are well-positioned to play a lead role for such long-term transition strategies”. While this in itself does not address the frustrations of developing countries, it certainly marks a step in the right direction.

Markets

As the missing piece in the Paris Rulebook, markets unintentionally occupied the spotlight at COP-25. Failure to deliver Article 6 at the end became not only a grave disappointment to the carbon market community but also dealt a blow to the COP as a whole. Unfortunately, it was also something of a déjà vu. Like the previous year at COP-24 in Katowice, negotiations on Article 6 extended long after the official closing of the COP, causing COP-25 to be the longest session in the history of the UNFCCC – only to accept defeat in the early hours of Sunday morning.

Seeing history repeat itself seems particularly painful as Parties and those orchestrating the negotiations had made every effort to learn from the past. Early on in the process, the negotiations chair engaged political leaders and heads of delegations in a conversation on what were seen as the main political controversies: the transition of the Clean Development Mechanism’s (CDM) activities and units to the Paris context, the application of a “share of proceeds” for adaptation finance to cooperative approaches under Article 6.2 (so far only agreed for the Article 6.4 mechanism) and the requirement to perform ‘corresponding adjustments’ to units issued under Article 6.4 (opposed by Brazil and like-minded developing countries). At the middle of the conference, the facilitating ministers from South Africa and New Zealand reported that they were seeing a landing zone for two of the three controversies. The alternation between serious progress and continued stalemate was perhaps the most defining characteristic of the negotiations, making the final outcome difficult to predict. However, it is good to highlight that what was achieved along the way was certainly not all grim.

Parties showed a willingness to compromise…

First and foremost, the negotiations did not see any stalling tactics and Parties showed serious commitment towards completing the task in Madrid and working together constructively until the final hours. In the spirit of finding compromise, they were willing to soften some long-held positions. For example, to meet a key ask of the Alliance of Small Island States (AOSIS), Parties that had not hitherto done so accepted that “overall mitigation of global emissions” could be operationalized through a mandatory discount on emission reductions. Some developed countries stretched beyond their comfort zone in discussing adaptation finance under Article 6.2 and the EU showed willingness to engage on CDM transition, including allowing a limited transfer of pre-2020 credits. The discussion on accounting methods for corresponding adjustments was particularly encouraging as Parties’ grasp of this overly technical issue matured and converged. The definition of baselines and additionality under the Article 6.4 mechanism, on the other hand, did not see a common position emerge.

Under the Chilean presidency’s effort to broker a deal, new concepts were introduced into the final negotiation texts, such as a limited possibility for a Party to opt out of corresponding adjustments for activities under the Article 6.4 mechanism or the creation of a reserve fund of pre-2020 CERs. While this opened up a path towards compromise for some of the stickiest issues, Parties failed to come to an agreement on the detailed terms. A political controversy that proved unbridgeable, however, was the question of whether all transactions under Article 6.2 – the key provision enabling trades between countries – should come with a (mandatory) levy (fiercely opposed by the US and Canada who consider it paramount to the application of a tax on their carbon pricing schemes) or simply a voluntary contribution. While there were still too many loose ends to clutch a deal during overtime, delegates did not seem dispirited by the overall outcome. Crucially, they agreed to continue the negotiations based on the three texts prepared by the Chilean presidency, thus safeguarding the progress made when SBSTA reconvenes in June 2020.

A noteworthy development during COP-25 was the formation of larger-scale coalitions. The most striking example is the emergence of G77+China on the scene, which for the first time in the negotiations of markets was able to unite behind a common position, namely calling for the extension of a mandatory share of proceeds to Article 6.2. Another example is a large developing country coalition of AOSIS, least developed countries (LDCs), the Association of Latin American and Caribbean countries (AILAC) and the African Group of Negotiators (AGN) tabling a joint proposal on overall mitigation and share of proceeds across Article 6. Closer collaboration also emerged between the like-minded developing countries (spearheaded by Saudi-Arabia, India and China) and Brazil.

…however, overall, the negotiations saw the traditional dividing lines between developed and developing countries resurface.

With the repeated failure of COP-25 to operationalize Article 6, the question is whether Parties will continue to strive for a successful outcome in 2020. There are already signs of some wavering commitment, in line with the familiar mantra “no deal is better than a bad deal”. Minister Shaw from New Zealand, who facilitated high level negotiations during COP-25, suggested to postpone Article 6 negotiations for a few years while multilateral and bilateral cooperation could go ahead in practice and in absence of the ruleset. [5] Another break-up tendency is the formation of a group of signatories to the San José Principles for High Ambition and Integrity in International Carbon Markets during the final hours of negotiations. The “unconventional group” is led by Costa Rica and Switzerland and currently has 32 member countries from AILAC, AOSIS, the Umbrella group and the EU.

Lastly, pressure on Article 6 negotiations is building from outside the UNFCCC process. In the absence of an Article 6 ruleset, the International Civil Aviation Organization (ICAO), which is in the process of developing a “Carbon Offsetting and Reduction Scheme” or “CORSIA” to control the rise in CO2 emissions from international aviation, is left to single-handedly define its own rules for global emissions trading. A growing voluntary market is also asserting itself and establishing standards for robust accounting in the post 2020 period, highlighting that credible emission reductions can be assured through robust baseline and additionality rules and do not depend on government action.

Loss and damage

Originally designed prior to the adoption of the Paris Agreement – at the Warsaw COP (COP 19) in 2013 – the Warsaw International Mechanism for Loss and Damage (“WIM”) responds to the fact that climate change is no longer a projection, but a reality that is presenting countries with actual losses and damages – ever more often catastrophic ones. People in poorer countries are at least five times more likely to be displaced by extreme weather than people in rich countries.[6]

The Paris Agreement gave the WIM recognition (Article 8.2 Paris Agreement) and placed it under the authority of the CMA. However, the mechanism lacks operationalization in terms of institutional responsibilities, business processes and importantly, finance. Developing countries have been trying to move these negotiation topics forward, until recently with little success. The Madrid outcome brought some improvements, if at a modest scale. The decision on the WIM is broad in its scope and adds considerable detail to the rationale and overall purpose of the mechanism.

And yet, the core dealings of the WIM remain as vague as the latest add-on to the mechanism, the “Santiago network for averting, minimizing and addressing loss and damage associated with the adverse effects of climate change, to catalyze the technical assistance of relevant organizations, bodies, networks and experts, for the implementation of relevant approaches at the local, national and regional level, in developing countries that are particularly vulnerable to the adverse effects of climate change…” [7] While there is a deep associative capacity of the Santiago network, there is nevertheless, little clarity on what the mechanism generates, for whom and when, and how much funding will be made available. Which brings us back to the issue of climate finance in general.

A complication concerning treaty governance has been presented by the fact that the United States (US) – a key industrialized country and historic contributor to climate change – is in the process of withdrawing from the Paris Agreement. This withdrawal would remove any obligation for the US to engage in the WIM, if the mechanism were governed by the Paris Agreement only. Developing countries are understandably eager to keep the WIM on the agenda of its treaty of origin, the Convention, to which the US remains a party. Hence, the Madrid conference produced two WIM decisions, one from the CMA, the other from the COP. The latter decision is a simple referral (really – again?) of the governance matter to COP-26.

Non-state action

If governments keep dragging their feet, maybe solutions must be powered by non-state actors. This seems counter-intuitive, not at least because the most official window for non-state action within the mechanics of the Paris Agreement is provided by the very provision – Article 6 – for which negotiations have stalled once again.
And yet, both non-governmental for-profit and not-for-profit organizations are claiming an ever more important role when it comes to addressing the climate emergency. From youth organizations to financial services firms, from Greta Thunberg to BlackRock – the world’s largest asset manager with USD 6.8 trillion under management – from subnational governments to businesses, academia and Indigenous Peoples, non-state actors have started to engage forcefully in the combat against climate change and may yet demonstrate orchestrated leadership where governments cannot. For example, in the context of “Business Ambition for 1.5°C — Our Only Future”, 177 companies have pledged to set highly ambitious emissions reduction targets to help limit the worst effects of climate change — more than doubling in size since the first group of early movers was announced in September. The corporate shift away from the mantra of ‘individual interests only’ to a new understanding of shareholder responsibility for climate and environmental sustainability is particularly encouraging. At the same time, the Paris Agreement provides an increasingly important reference point for corporate action.

Wrapping up COP25

All this leaves one both exhausted and hopeful. The deferral of so many pressing issues to the next COP almost seems a dereliction of duty. And yet, the international battleship – the Conference of the Parties – continues to move forward. The degree of compromise Parties were offering – if ultimately to no avail – may still bode well for the Glasgow negotiations.

At the same time, non-state actors are sure to put increasing pressure on their governments to weave an international framework for cooperation. For all the enthusiasm they inspire, non-state actors cannot model the transformation to a zero-emissions economy alone. Governments are essential on this road.

If anything, COP-25 has demonstrated the growing disconnect between public expectation and government action, and between non-governmental leadership and political realism. And it has pointed to the amount of work still to be done.

Now – if there was time, one could relax and consider the long-term merits of procedural phenomena such as the one presented by the UNFCCC’s Rule 16: patience and persistence perhaps. But surely, time is the one thing the planet does not allow us. In a world that is literally burning, we are not at liberty to spend another 25 COPs debating the options for ‘cooperative approaches’ to save the world.

[1] Decision 1/CP21 para 23 and 24.

[2] Countries that have signed up to the alliance have committed to increase their ambition and submit a revised NDC next year. So far 42 countries have confirmed that they will update their NDC next year and 79 have confirmed that they want to increase their ambition. However, these commitments come mostly from smaller countries, contributing together not much more than 10 percent of global emissions.

[3] Decision 1/CMA2.

[4] OECD (2019), Climate Finance Provided and Mobilized by Developed Countries in 2013-2017, puts the latest available figures (for 2017) at USD 71.2 billion

[5] In an interview given to Carbon Pulse.

[6] Oxfam (2019), Forced from Home: Climate-fueled displacement.

[7] Draft WIM Decision COP25, para 43.

For First Time Ever, Environment Tops Global Risks

21 January 2019 | “The political landscape is polarized, sea levels are rising and climate fires are burning,” said World Economic Forum President Børge Brende as he unveiled the WEF’s 15th Global Risks Report, which showed that, for the first time ever, the five most likely risks to the global economy are all related to the environment, as are four of the most impactful.

“This is the year when world leaders must work with all sectors of society to repair and reinvigorate our systems of cooperation, not just for short-term benefit but for tackling our deep-rooted risks,” he added.

The report was released last week, but the official meeting runs from today through Friday in Davos. The theme is collective action for risk reduction, and the top five risks in terms of likelihood are:

  • Extreme weather events
  • Failure of climate change mitigation and adaptation
  • Natural disasters
  • Biodiversity loss
  • Human-made environmental disasters

The top five risks in terms of impact are:

  • Failure of climate change mitigation and adaptation
  • Weapons of mass destruction
  • Biodiversity loss
  • Extreme weather
  • Water crises

The report found that younger respondents ranked environmental issues higher than did older respondents, but that respondents across the board were more attuned to environmental risks beyond climate change than they had been in previous years.

“High-profile events, like recent wildfires in Australia and California, are adding pressure on companies to take action on climate risk at a time when they also face greater geopolitical and cyber risk challenges,” said John Drzik, chairman of Marsh & McLennan Insights.

 

Why We Can Believe Microsoft and BlackRock On Climate Pledges

17 January 2020 | Asset-management group BlackRock made headlines around the world on Tuesday when it said it would redirect its seven-trillion-dollar war chest away from climate-changing investments and into climate-saving ones. Two days later, it was Microsoft’s turn in the limelight. On Thursday, the software giant said that by 2030 it will be sucking more greenhouse gas from the atmosphere than it emits, and that by 2050 it will have pulled more of the stuff out of the air than it’s ever put into it over what will then be 75 years of manufacturing and energy use.

“This is getting real,” says environmental scientist Jason Funk, who runs the Land Use & Climate Knowledge Initiative (LUCKI). “It would send a powerful signal if Microsoft invested in the world’s oldest form of carbon removal: natural forests, which deliver an incredible array of additional benefits.”

Natural forests, it turns out, have been a big part of Microsoft’s carbon removals strategy for almost a decade, but the company looks to be pinning its future on unnatural ones – or, more specifically, on “afforestation” (planting trees where forests either never existed or haven’t for a long time) and “reforestation” (planting trees where forests have recently been destroyed), for reasons that I’ll loop back to below, but which aren’t quite clear.

I’ll start with the positives.

In a detailed but very readable blog, company president Brad Smith outlines a 30-year carbon removal strategy that blends direct reductions like those achieved by shifting to electric vehicles and renewable energy with removals that offset emissions by planting trees or investing in new technologies that suck carbon from the atmosphere. Impressively, the company isn’t just offsetting its own residual emissions, but “scope 3” emissions as well. These are emissions that suppliers and consumers generate, and they’re often higher than those emitted in the manufacturing process.

Discouragingly, however, the company gives short shrift to programs that increase removals by saving endangered natural forests (“REDD+”, for “reducing emissions from deforestation and deforestation, plus enhancement of carbon stocks”).

Microsoft is using “avoided emission” offsets to become carbon neutral by 2030, but it will shift to “emission removals” over time.

 

Reductions, Removals, and Microsoft’s History of Offsetting

Unlike BlackRock, Microsoft isn’t a newcomer to the climate challenge or to carbon offsetting. The company has always recognized the validity of climate science, and it began experimenting with offsetting in general and REDD+ in particular nearly a decade ago, when it started investing in projects that save endangered forests in Madagascar and elsewhere.

Smith, however, seems to see REDD+ as part of the company’s past and not its future. (I’ve asked Microsoft for clarification, and may revisit this.)

“One way to avoid a reduction in emissions is to pay someone not to cut down the trees on the land they own,” he writes. “This is a good thing, but it…doesn’t lead to planting more trees that would have a positive impact by removing carbon.”

The debate over reductions vs removals is an acrimonious one, and Smith’s characterization of REDD+ as merely a reduction and not a removal is sure to rankle forestry proponents. Living forests, after all, do remove greenhouse gasses from the atmosphere, and it can take decades for newly-planted saplings to absorb as much carbon as an established forest emits when it’s destroyed.

Still, Microsoft has earned credibility as a company that uses offsets strategically to accelerate real reductions, as Ecosystem Marketplace’s past analyses of carbon offset buyers shows. The company was, for example, one of the first to implement an internal price on carbon and to charge its internal divisions for the greenhouse gasses they emitted.

“This can incentivize divisions to find emissions reductions opportunities at their source while also raising a pot of money that can then be reinvested – sometimes in offsets,” wrote Allie Goldstein in 2016’s “Buying In: Taking Stock of the Role of Offsets in Corporate Carbon Strategies.”

BlackRock’s announcement may actually have a greater long-term impact – in part because of the company’s size, but also because of its history as a smooth-talking but poor-acting environmental scofflaw.

“If you felt the earth tremble a little bit in Manhattan on Tuesday morning, it was likely caused by the sheer heft of vast amounts of money starting to shift,” wrote Bill McKibben in the New Yorker. “By one estimate, there’s about eighty trillion dollars of money on the planet,” he continued. “If that’s correct, then BlackRock’s holding of seven trillion dollars means that nearly a dime of every dollar rests in its digital files.”

To put that into perspective, Ecosystem Marketplace identified a total of $8 billion in growth-oriented conservation finance and another $8.7 billion in government-funded conservation finance worldwide in 2016, and BlackRock’s $7 trillion under management is 875 times that. The amount invested in good behavior has certainly increased along with growing awareness of natural climate solutions, but the money flowing into the destruction of forests is still nowhere near the nearly $500 billion flowing into activities that destroy forests.

In his letter to CEOs, BlackRock CEO Larry Fink made it clear it was shifting assets for the good of its investors, and not for the benefit of the planet.

“Our investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors,” he wrote. “And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”

The company, in other words, isn’t shuffling its investments to change the world; it’s shuffling them because the world is changing, and for the best. Let’s just hope it isn’t changing too late.

Carbon Footprint Labeling: An Idea Whose Time Has Come?

15 January 2020 | Twenty years ago, few people knew or cared what trans fats were – let alone how much of the artery-clogging gunk they were absorbing through their cookies, cakes, and chicken nuggets. By 2006, however, dozens of countries had mandated the labeling of trans-fat content, and consumer awareness soon drove the levels down dramatically.

Around the same time, more than a dozen private and governmental entities tried to do the same thing with greenhouse gasses by labeling products based on the amount emitted to bring various products to market. Major retailers like Tesco and household brands like Quaker Oats soon started labeling their products, while governments from the UK to China considered mandating the practice.

But mandatory labeling never materialized, and most of the companies that were voluntarily labeling stopped within a decade, citing high costs of auditing and low consumer demand.

Then, last year, Greta Thunberg sailed to America as voluntary offsetting hit a seven-year high and nearly 100 companies pledged to slash their greenhouse-gas emissions at least to levels in keeping with the Paris Climate Agreement.

Was it time to reconsider carbon footprint labeling?

Quorn certainly thinks so.

One of the world’s largest manufacturers of vegetarian meat substitutes, Quorn will begin posting the carbon footprints of its 30 top products online beginning Thursday, with physical labels will showing up on some products in June.

The “farm to shop” carbon footprint is calculated by the Carbon Trust, which created the labeling program in 2006. Carbon Trust research in 2019 found that two-thirds of consumers support the idea of a recognizable carbon label to demonstrate that products have been made with a commitment to measuring and reducing their carbon footprint.

Planet Australia is Us

One way to think about the devastating fires in Australia—and perhaps to grasp more clearly how climate change plays out across the globe—is to imagine that the southern continent was, in fact, a planet all its own.

In a small sense that’s how it actually feels, since you can’t get to Australia from much of the world without a long journey. And Australians are self-sufficient in many ways, growing plenty of food in a nation well-endowed with soil, sun, and water, though that’s becoming more difficult now because of climate change–fueled, gripping drought. Australia also has its own complement of flora and fauna found nowhere else on earth—not just koalas and kangaroos but also quolls and wombats and sugar gliders.

For a long time, its isolation served Australia well—the “lucky country,” it styled itself. It was even a little sheltered by its isolation from fears of nuclear war, as those old enough to remember the classic movie On the Beach will recall.

But now Australia is suffering, harshly, the early effects of climate change. It turns out that its unique physical features are remarkably susceptible to the global warming that’s now in its early stages. The Great Barrier Reef has been damaged by several bouts of severe bleaching from hot ocean water. The enormous kelp forests that ringed Australia’s southern coasts have been all but wiped out. And now fire has come in a way it never has before.

As the earth gets hotter, droughts grow deeper and more prolonged. We’ve seen this in California (whose climate is close enough to Australia’s that millions of highly flammable eucalyptus trees thrive in the Golden State as well), and now we see it in the Australian states of Victoria and New South Wales, where record temperatures and record aridity have set the stage for firestorms so intense that they generate their own weather. Last weekend the town of Penrith west of Sydney was the hottest spot on earth, with the mercury near 120 degrees Fahrenheit and a relative humidity in the single digits. This is a precise recipe for an inferno, one that will be repeated across the globe in similar terrain.

Australia is also a microcosm in its economy and attitudes. Most of the early victims of climate change—low-lying Pacific islands or far northern indigenous communities—had done little, if anything, to cause the problem. But Australia is different. Its citizens vie with Canadians and Americans to emit the most carbon per capita in the world. And far more damagingly, Australia exports more coal than any nation on earth. Yet the majority of Australians have chosen not to do much about that. In their last national election, they gave power to one Scott Morrison, who made his bones as a political figure when, in 2017, he carried a lump of coal into Parliament to pass around to his mates. “Don’t be scared of it,” he said. “Don’t be afraid.”

In other words, if Australia really were a planet it would be quickly, all by itself, destroying its climate. It can’t blame the destruction on others; in any moral calculation, Australia has done this to itself. Which is not to say individual Australians themselves are to blame. As elsewhere, the fossil fuel industry has done all it can to manipulate political systems: The election that brought Morrison to power saw one coal baron spend more money on campaign ads than the country’s major political parties combined. (The same coal baron, Clive Palmer, is also building a full-size working replica of the Titanic, if you like metaphor overload). And of course, the Australian political discussion is poisoned by its native son Rupert Murdoch, who owns most of the country’s newspapers and uses them to—well, you’ve seen Fox News.

Fortunately, everyday Australians are rising up to say enough is enough. Young people are protesting at record levels, volunteer firefighters are showing immense heroism, and impacted communities are demonstrating incredible altruism in the face of disaster. Citizens in fire-ravaged towns refused to shake hands with Morrison when he, just back from a Hawaiian vacation, had the gumption to belatedly tour the ashes.

But the test of true change will be what Australia’s politicians do about the massive new fossil fuel proposals before them, such as the massive Adani coal mine (one of the biggest new coal mines on earth), the potential opening of the Great Australian Bight to offshore oil drilling, and the calls to frack enormous amounts of gas in the Northern Territory. So far, the omens are not good—Morrison has said he’s thinking instead of legislation that will make it illegal for activists to pressure banks to stop lending to fossil fuel development.

Australia is a microcosm of the world in another way too. Having savagely repressed its indigenous population, its government steadfastly ignores those people’s expertise in managing fire on the landscape. Whether that indigenous knowledge can cope with a climate that is changing as abrupt as ours remains an open question, but undertaking a real dialogue with the only people who’ve managed long-term occupation of the continent seems like a sound idea.

The idea of Australia as a planet of its own only goes so far, of course—even if it stopped exporting coal tomorrow and resolved to power its own economy with abundant wind and sun, Australia’s temperature would continue to rise. The country cannot, by itself, solve global warming. But if the shock of these hideous firestorms is what’s required to decisively change Australia’s politics, technology, and relations with the continent’s original inhabitants, that example would demonstrate to the rest of the world that real change is not impossible. Imagine an Australia that stopped building new coal mines and started installing more giant solar farms and batteries; imagine an Australia where people retreated enough to give the natural world the margin it clearly requires.

What we’re going to see, over the next year or two, is whether modern societies are capable of responding to this kind of horror with the speed and courage that science demands. Planet Australia may be the best experiment we ever get.

Australia, Your Country is Burning; Dangerous Climate Change is Here With You Now

After years studying the climate, my work has brought me to Sydney where I’m studying the linkages between climate change and extreme weather events.

Prior to beginning my sabbatical stay in Sydney, I took the opportunity this holiday season to vacation in Australia with my family. We went to see the Great Barrier Reef – one of the great wonders of this planet – while we still can. Subject to the twin assaults of warming-caused bleaching and ocean acidification, it will be gone in a matter of decades in the absence of a dramatic reduction in global carbon emissions.

We also travelled to the Blue Mountains, another of Australia’s natural wonders, known for its lush temperate rainforests, majestic cliffs and rock formations and panoramic vistas that challenge any the world has to offer. It too is now threatened by climate change.

I witnessed this firsthand.

I did not see vast expanses of rainforest framed by distant blue-tinged mountain ranges. Instead I looked out into smoke-filled valleys, with only the faintest ghosts of distant ridges and peaks in the background. The iconic blue tint (which derives from a haze formed from “terpenes” emitted by the Eucalyptus trees that are so plentiful here) was replaced by a brown haze. The blue sky, too, had been replaced by that brown haze.

The locals, whom I found to be friendly and outgoing, would volunteer that they have never seen anything like this before. Some even uttered the words “climate change” without any prompting.

The songs of Peter Garrett and Midnight Oil I first enjoyed decades ago have taken on a whole new meaning for me now. They seem disturbingly prescient in light of what we are witnessing unfold in Australia.

The brown skies I observed in the Blue Mountains this week are a product of human-caused climate change. Take record heat, combine it with unprecedented drought in already dry regions and you get unprecedented bushfires like the ones engulfing the Blue Mountains and spreading across the continent. It’s not complicated.

The warming of our planet – and the changes in climate associated with it – are due to the fossil fuels we’re burning: oil, whether at midnight or any other hour of the day, natural gas, and the biggest culprit of all, coal. That’s not complicated either.

When we mine for coal, like the controversial planned Adani coalmine, which would more than double Australia’s coal-based carbon emissions, we are literally mining away at our blue skies. The Adani coalmine could rightly be renamed the Blue Sky mine.

In Australia, beds are burning. So are entire towns, irreplaceable forests and endangered and precious animal species such as the koala (arguably the world’s only living plush toy) are perishing in massive numbers due to the unprecedented bushfires.

The continent of Australia is figuratively – and in some sense literally – on fire.

Yet the prime minister, Scott Morrison, appears remarkably indifferent to the climate emergency Australia is suffering through, having chosen to vacation in Hawaii as Australians are left to contend with unprecedented heat and bushfires.

Morrison has shown himself to be beholden to coal interests and his administration is considered to have conspired with a small number of petrostates to sabotage the recent UN climate conference in Madrid (“COP25”), seen as a last ditch effort to keep planetary warming below a level (1.5C) considered by many to constitute “dangerous” planetary warming.

But Australians need only wake up in the morning, turn on the television, read the newspaper or look out the window to see what is increasingly obvious to many – for Australia, dangerous climate change is already here. It’s simply a matter of how much worse we’re willing to allow it to get.

Australia is experiencing a climate emergency. It is literally burning. It needs leadership that is able to recognise that and act. And it needs voters to hold politicians accountable at the ballot box.

Australians must vote out fossil-fuelled politicians who have chosen to be part of the problem and vote in climate champions who are willing to solve it.

How To End Deforestation? Two Decades of Lessons Learned in the Greater Mekong

This Story First Appeared on the Forest Trends Viewpoints Blog

19 December 2019 | It’s home to spectacular beauty, abundant natural resources, and more than 300 million people spread across Cambodia, Lao PDR, Myanmar, Vietnam, Thailand, and China. Yet the Greater Mekong has been gripped by conflict and political crises, creating in many places conditions ripe for illegal forest conversion.

Forest Trends is credited with first opening the dialogue with the Chinese government on China’s imports of illegally harvested logs, nearly two decades ago.

Since then, we have helped to shape trade deals blocking exports of illegal timber from Vietnam and Laos, and were a driving force in harmonizing laws to prevent illegal timber imports into the US, EU, and nations in the Asia Pacific.

Our data on trade flows in illegal timber influenced a ban on unprocessed wood exports from Laos, resulting in a steep drop in illegal trade.

Most recently, with our work in Myanmar, Forest Trends is a pioneer in the new field of environmental peace-building.

Our founder and CEO, Michael Jenkins, and Director of the Forest Policy, Trade, and Finance Initiative Kerstin Canby recently sat down for a wide-ranging conversation on the history of Forest Trends’ work in the Greater Mekong over the last two decades, and what may come next.

[This conversation has been edited for length and clarity.]

Michael Jenkins

Michael Jenkins:

We really began looking at forest conversion and illegality when we came to a realization that all the well-intentioned conservation projects in the world can’t compete when illegal logging and commercial agriculture are so lucrative. There are very powerful financial incentives that you’re up against. We knew we needed to find a strategy that addressed that if we wanted to prevent deforestation.

Kerstin Canby:

Right. We also saw that where you found forest conversion, you also tended to find land rights abuses and corruption. We saw that poor governance could undermine good conservation policies at every turn, and hurt communities. That’s why we’ve focused on governance issues from the beginning.

Jenkins:

And of course governance is very complicated.

Kerstin Canby

Canby:

It’s very difficult to root out corruption and build strong governance systems to manage forests sustainably and prevent deforestation. It will take years.

Our strategy has been to work at the problem from both ends: in producer countries in the Mekong Region we work with in-country partners to advocate for sound policy, transparency, and civilian oversight. We want governments of these countries to see illegal conversion and logging as a threat to their governments and economic growth. At the same time we work to put the squeeze on the trade in illegal timber at the consumer-country end.

By design, we’re a small, nimble organization, so when we see an opportunity, that’s where we jump. That’s what happened with the opening in China.

Jenkins:

When we started Forest Trends in 1999 we had this vision: if we recognize the economic values of nature, markets for ecosystem services will bloom, and we’ll mainstream nature into commerce.

What happened instead was China had made a decision to ban logging in their forests around 1998, after some major floods in deforested areas in which lives were lost. And suddenly the map of timber flows changed. Timber that was moving mostly into Japan and Europe almost overnight switched to China. It was coming from the Russian Far East, Southeast Asia, East Africa – all places with poor governance at the time. We saw there was a missing piece in our theory of change. We needed to move China as a consumer of timber to demand legality and sustainability.

Canby:

Governments were drawn to payments for ecosystem services as a new idea, but as long as cheap illegal timber undermines you, payments for ecosystem services won’t work to prevent deforestation.

We put together a series of papers in 2002 and 2003 tracking the footprint of the recent Chinese policy to stop harvesting timber domestically, showing the impact of Chinese demand on countries like Papua New Guinea, Laos, Cambodia, Mozambique, and the Russian Far East. We saw ripple effects. China was essentially exporting environmental damages to countries with weak governance, and making both legal and illegal trade channels into China even more lucrative.

“By design, we’re a small, nimble organization, so when we see an opportunity, that’s where we jump.

That’s what happened with the opening in China.”

That was a time of opening in China. At that time we had a good dialogue with the Chinese government, built through our previous work on grasslands policy. They were comfortable talking to us and saw us as researchers, not an advocacy group. Our reports focused on data, and we always worked with Chinese researchers to produce data with us.

That was why Chinese officials were willing to talk to us about illegal timber. It was a long trust building exercise.

Forest clearing for agricultural plantations in Cambodia. Photo Credit: Marcus Hardtke

Jenkins:

As a result of the harvesting ban, China was like this giant vacuum sucking up timber from around the world. That was the reality for a year or two. But what we discovered was that it was already starting to become the world’s woodshop. Within a few years, it would become a major exporter. China would import illegal or high-risk timber from tropical countries and produce furniture for companies like Ikea, and export it to Europe and the US.

Trade flows are very dynamic. Even as China was beginning to engage in looking at illegal timber, we realized things were already shifting to Vietnam.

Canby:

By 2006 or 2007, Vietnam was becoming a mini-China in terms of wood processing. Luckily, we’ve found that the government has been responsive. They’re really working on putting in place strong regulations and traceability.

Over the years a lot of the wood entering China is starting to stay in China, especially high-value species. But Vietnam is still exporting a lot to the EU and US. That gives us more leverage through the EU Timber Regulation and the US Lacey Act. We can work from the demand side to put pressure on bad actors to prevent deforestation.

Jenkins:

Asian countries, as they’ve become larger importers of timber, are also developing import regulations. We’ve seen this happen in China, Japan, [the Republic of] Korea, Vietnam, Indonesia, and Malaysia over the last couple years. The incentive structure is changing for companies to only deal in legal timber.

Canby:

Of course, enforcement will be the key. But in places like Laos, where our trade data was one of the drivers behind the government banning the export of logs and sawnwood, regulations have been pretty successful. The government in Laos seems committed to addressing corruption in natural resource management. Cambodia is maybe another story.

“Much of the last remaining forests of Myanmar are located in the territories under the control of ethnic groups. It’d be like if California was controlled by rebel groups, but you were only talking to the federal government about forest management in California. It just doesn’t make sense.

So we decided we were going to talk to the rebel groups.”

Jenkins:

When we started looking at these issues in Myanmar, we stumbled into an entirely new field – what we call environmental peace-building.

Canby:

Myanmar was just opening up in 2014-15. We felt strongly from the beginning that any forest sector reform process also needed to be working with ethnic political organizations, even as fighting between their armed groups and the Union government continued.

Much of the last remaining forests of Myanmar are located in the territories under the control of ethnic groups. It’d be like if California was controlled by rebel groups, but you were only talking to the federal government about forest management in California. It just doesn’t make sense. So we decided we were going to talk to the rebel groups.

Jenkins:

Natural resources can be a driver of conflict. But they can also become a table for everyone to meet around. You’re at the edge of democracy, at the negotiating table – forests become a way in.

A logging camp in Myanmar.

Canby:

Two ethnic groups that we’ve worked with have their own forestry departments, with their own policies and forest laws. We thought, if we work with them on their policies, we can put in seeds of ideas that will help them have forest policies that are up to international standards, and reflect local priorities rather than the priorities of the central government. Things like Free Prior and Informed Consent, traceability, and anti-corruption measures.

It gives these groups a clear negotiating stance when they’re negotiating a peace agreement with the Union government.

Jenkins:

Something like fewer than 15 percent of peace agreements cover resource use. But we know that natural resources can fuel violent conflict. As countries are going through the post-conflict peace process, we see an opportunity to create structures to ensure good governance, and to make sure that local populations are sharing in benefits from natural resources.

Canby:

We want to put what we call “integrity mechanisms” in place before the vested interests arrive. Once someone gets put in charge of the forestry department and becomes a millionaire through corrupt means, they have the power to make sure anti-corruption measures are never put in place.

Jenkins:

We can prevent deforestation long before it happens. It’s a new way of thinking about these issues.

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Four Things That Happened This Year That Will Make You Hopeful About Climate

This story first appeared on the Forest Trends Viewpoints Blog

18 December 2019 | Here are four reasons to be optimistic as we head into 2020. They’re also the reasons why we are working harder than ever to mobilize finance for conservation and ecological restoration around the world.

Wishing you happy holidays!

FOUR REASONS WE’RE LOOKING FORWARD TO 2020

1. We don’t need to wait for high-level international agreements to make progress on climate.

The climate talks closed on Sunday without a final agreement on Article 6, which governs international carbon trading. But dozens of countries are set to move forward anyway, through regional “carbon clubs.”

Learn more: How Carbon Markets Can (and Can’t) Grow with Article 6 on Ice

Companies aren’t waiting for regulations to go carbon-neutral. In 2019, they voluntarily offset their carbon impacts at near-record levels.

Learn more: Demand for Nature-based Solutions for Climate Drives Voluntary Carbon Markets to a Seven-Year High

Outside of carbon finance, investments in nature-based solutions also boomed in 2019, as countries looked to healthy natural landscapes to ensure water security and climate resilience.

Learn more: Investments in Natural Infrastructure for Water Security in Peru Increased 30x in Five Years

2. When it comes to deforestation, bad actors are running out of room to operate.

In 2019, we saw a perfect storm of growing consumer awareness, investor pressure, forthcoming regulation, and technological advances, that changed “business as usual” forever for companies with forest risk in their palm, soy, cattle, and timber/pulp supply chains.

This year, we worked with Ceres to release a pair of briefs guiding investors on how to effectively engage companies on deforestation. And we published a white paper proposing a radical – but surprisingly simple – way for mainstream investors to ensure their investments support climate action.

Learn more: Targeting Zero Deforestation

Learn more: Harnessing Private Investor ‘Willingness-to-Pay’ for Climate Change Mitigation

We’re also providing guidance and resources to policy-makers to help them pass effective regulations to keep forest risk commodities out of their markets.

Learn more: Tackling Deforestation and the Trade in Forest Risk Commodities: Consumer-Country Measures and the ‘Legality Approach’

New scientific testing tools are transforming countries’ ability to enforce regulations to exclude illegal timber from global trade. This is a development that we’re excited about and watching closely.

Learn more: 5 Things to Know about the Use of Scientific Testing in the Enforcement of Timber Import Regulations

3. The world is beginning to acknowledge the true stewards of our planet.

The women of the San Juan de Cañaris peasant community in Peru, concerned about the neglect of the quina tree by authorities, decided to get involved in restoring and conserving high-altitude montane and mist forests where the tree is found. The quina tree has important medicinal properties and serves as a water collector for the ecosystem. Credit: Omar Jhair Gómez Rengifo.

In 2019, Forest Trends and its partners made strategic investments in forest-based enterprises in indigenous communities to create an economic engine that keeps forests intact.But these communities and the forests they protect are still under threat.

Learn more: Climate Finance Must Stop Excluding Indigenous Communities

Learn more: We End Forest Loss in the Amazon through Investment in the Indigenous Frontline

Traditional communities – and women in particular in those communities – also are incredible sources of knowledge about natural resource management.
In 2019, we convened the first Gender Equality and Water Security Forum in Peru, and announced the launch of a new Leadership Program for Women in Natural Infrastructure.

Learn more: Peru’s Leading Water Institutions Commit to Increasing Women’s Role in Water Management at First-of-Its-Kind National Forum

4. We’re finally seeing the forests for the peace.

Mawlamyine, Myanmar, November 2016.

In post-conflict places like Myanmar, a focus on natural resources governance often offers the best chance to reboot stalled peace processes and transition to democracy. In 2019, Forest Trends continued our pioneering work in the new field of “environmental peacebuilding.”

Learn more: Peace Process Must Address Natural Resources Governance: Forest Trends

Learn more: In Myanmar, Better Oversight of Forests a Vital Step in Transition to Rule of Law

Feeling Inspired? Here’s How You Can Help.

  1. Check out Supply Change to see if the brands you buy are committed to zero deforestation.
  2. Want to offset your own carbon footprint? Read our guide to carbon offsetting.
  3. Make a year-end gift to Forest Trends. We’re launching a major campaign to mobilize funding to restore natural ecosystems on a historic scale, and we truly need your support.

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How Carbon Markets Can (and Can’t) Grow With Article 6 on Ice

15 December 2019 | MADRID | Neither Franz Perrez nor Ricardo Salles were at the top of their game after a week of overnight negotiations at year-end climate negotiations here.

Perrez, who is Switzerland’s Ambassador for Climate Change, seemed a bit hyper, while Salles, who is Brazil’s Minister of Environment, seemed half asleep as Perrez unleashed a rhetorically subtle (but grammatically confusing) swipe at the Brazilian in the closing hours of year-end climate talks (COP25).

“We all know that if you (meaning either all climate negotiators or Brazil alone) had agreed here in Madrid on the last proposal that you (meaning Chilean Environment Minister Carolina Schmidt, in her capacity as President of COP25) presented, we would have created a robust source of funding for the Adaptation Fund,” said Perrez.

He made the comment just minutes after the Argentinian delegation had lamented the lack of funding for adaptation but hours after Salles, with help from the Australian delegation, had blocked agreement on how to create a rulebook for Article 6 of the Paris Climate Agreement. That’s the article governing international carbon markets, and a clear rulebook could have provided adaptation funding through transaction fees and other benefit-sharing arrangements. Instead, it remains the only article that doesn’t have clear procedures of implementation.

More than half of all Paris Agreement signatories included markets in their climate action plans (NDCs), and without clear guidance on markets, higher ambition cannot be defined.

Still, dozens of countries seem set to move forward on markets by building on those elements of the Article 6 rulebook that almost everyone agrees on, while the International Civil Aviation
Organization (ICAO) is moving ahead with its emission trading system for international passenger flights, set to begin phasing in at the end of 2020.

 “The Last Proposal You Presented”

The last proposal that Schmidt presented came shortly after 1am local time, following 12 straight hours of negotiations. Perrez and representatives from several other countries have vowed to move forward with the creation of bilateral and multilateral carbon markets under that text, even though further rulemaking was pushed back to the next meeting of the Subsidiary Body for Scientific and Technical Advice (SBSTA). That meeting will take place in June 2020, in Bonn, with final adoption happening at next December’s COP in Glasgow, Scotland, at the earliest.

Perrez said there was enough agreement on the rules for paragraph 6.2, which covers bilateral trading and accounting of emission reduction units, to move forward.

“We will seek to engage in bilateral activities under 6.2,” he said. “And, when doing so, we intend to apply the guidance and cooperative approaches as planted last night by the presidency.

Such cooperation could take the form of “Carbon Clubs,” which are clusters of countries trading among themselves much as countries operating under the General Agreement on Tariffs and Trade (GATT) already do. Support for carbon clubs seemed to be gaining support before the adoption of the Paris Climate Agreement in 2015, but the strength of the Agreement put that support on hold. After COP24 failed to generate a rulebook in Katowice, several negotiators told Ecosystem Marketplace they would revisit the use of carbon clubs if failure extended beyond COP25 in Madrid.

That failure has now arrived, and club proponent Nat Keohane, an environmental economist with the Environmental Defense Fund, says he’s getting indicators of interest from several participants.

“We are in the race of our lives to beat global warming, and the rules are changing,” he wrote in an e-mail to reporters. “A decade ago, the presumptive approach was a global governance structure under the auspices of the United Nations. Now, the challenges are more urgent and the landscape is more decentralized.”

The Current State of Article 6

Article 6 is broken into eight paragraphs, and rules for implementing three of those paragraphs went through several iterations over the past two weeks. Even before Schmidt’s intervention last night, there was widespread agreement on rules for paragraphs 6.2, which covers bilateral trading and accounting of emission reduction units, and 6.8, which covers non-market transfers.

The problem has always been rules around paragraph 6.4, which covers the creation of a centralized hub to replace the Kyoto Protocol’s Clean Development Mechanism (CDM). Brazil has been blocking efforts to restrict the use of old CDM units in the new mechanism, dubbed the “Sustainable Development Mechanism,” and also pushing for the right to count exported emission reductions towards its NDC, leading to a severely marked-up version until Schmidt forged a clean version this morning.

In the plenary, several ministers – including those from Egypt, Brazil, and the European Union – asked for the earlier, marked-up versions of the text to be passed on to negotiations in June so that all existing input could be considered.

(Note that, due to a glitch on the UNFCCC web site, these links are going to a Dropbox at press time. If they don’t work, you should be able to access the documents here.)

The San Jose Principles

On Saturday, 31 countries, known as the “Unconventional Group,” formally submitted the San Jose Principles for High Ambition and Integrity in International Carbon Markets to the COP. The principles had begun taking shape in September, at the Pre-COP San José, Costa Rica. Economically, the countries are a diverse bunch – ranging from industrial Germany to the island nation of Trinidad and Tobago – but they are all either highly threatened by climate change or highly progressive on meeting the challenge.

Switzerland falls into the latter category, and Perrez explicitly committed his country to the San Jose Principles in the closing plenary.

Who Loses Without 6.4?

Tragically, those countries that lose without clear rules around a Sustainable Development  Mechanism under paragraph 6.4 are the ones that need it the most: smaller countries without the scale or resources to develop their own trading infrastructure.

“I would say it would mean less access for a lot of countries because the carbon club concept is probably going to be taken forward by those that have been working in things like the Partnership for Market Readiness or that already have emission trading laws on the books or carbon taxes on the books and can accelerate and build on those,” said Dirk Forrister, CEO and president of the International Emissions Trading Association (IETA).

National programs like Colombia’s carbon tax will also continue, as will voluntary carbon markets, which appear to be headed for a record year in volume, according to Ecosystem Marketplace research.

International Passenger Flights

The biggest source of compliance demand on the horizon comes from ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which is part of an international agreement to cap emissions from international passenger flights at 2020 levels, beginning in 2021.

CORSIA will allow airlines to meet their obligations by purchasing ICAO-recognized offsets, but it is not yet clear which offset types will be recognized under the program. A decision is expected in early 2020.

In the meantime, EasyJet is already offsetting emissions from all flights voluntarily, while Air France and British Airways are voluntarily offsetting domestic flights. The potential new demand from airlines is enormous, as passenger flights generated the equivalent of 900 metric tons of carbon dioxide in 2018 alone.

CORRECTION: This story initially identified Edinburgh as the location of COP 26. 

Stock Taking Concludes as Article 6 Negotiations Continue

13 December 2019 | MADRID | Negotiations around the rulebook for implementing Article 6 of the Paris Agreement are continuing after revised texts covering the implementation of paragraphs 6.2, 6.4, and 6.8 were released at 11:45 Central European Time. A quick perusal shows plenty of bracketed text remains, as was expected, with key issues still unresolved.

An informal stock-taking was scheduled to take place at 1pm, but began at 2:45pm. You can watch it here:

It will also be archived here: here.

We will provide a detailed update as soon as there’s something to update.

New Markets Text Due Friday Morning, But Climate Talks Extended Through Weekend

12 December 2019 | MADRID | New Zealand Environment Minister David Parker had his game face on today, as did South African Environment Minister Barbara Creecy. They’ve taken on the challenge of forging agreement on how international carbon markets should operate under the Paris Climate Agreement, and Parker delivered an optimistic update on negotiations at today’s early afternoon stocktaking around implementing Article 6 of the Agreement, which governs international carbon markets.

Talks have stalled over how to implement Article 6, as we’ve covered here, here, and here.

Parker outlined several objectives that parties had agreed on, but they were objectives that no party has ever disputed – such as the need to reach a “mutually-acceptable outcome,” the need to ensure environmental integrity in NDCs, and the need to “find predictable and adequate resourcing for adaptation.”

He promised a new text on Friday morning, and we’ll provide an update as soon as it emerges.

High-Ambition Countries Re-Float Pre-COP Article 6 Principles

11 December 2019 | MADRID | With climate negotiators still deadlocked over how to incorporate carbon markets into the Paris Agreement, negotiators from several countries and the Alliance of Small Island States (AOSIS), known as the “Unconventional Group,” are attempting to build support for a set of principles that had emerged at the pre-COP in Costa Rica.

Below, without comment, are the principles, currently dubbed th “San Jose Principles for High Ambition and Integrity in International Carbon Markets.” For details on the current state of talks, see:

Climate Talks Remain Stuck on Markets

Technical Phase of Climate Negotiations Ends With No Agreement on Markets

The San Jose Principles

The “San Jose Principles for High Ambition and Integrity in International Carbon Markets” have gone through several iterations. Here is the most current:

  • Ensures environmental integrity and enables the highest possible mitigation ambition,
  • Delivers an overall mitigation in global emissions, moving beyond zero-sum offsetting approaches to help accelerate the reduction of global greenhouse gas emissions,
  • Prohibits the use of pre-2020 units, Kyoto units and allowances, and any underlying reductions toward Paris Agreement and other international goals,
  • Ensures that double counting is avoided and that all use of markets toward international climate goals is subject to corresponding adjustments,
  • Avoids locking in levels of emissions, technologies or carbon-intensive practices incompatible with the achievement of the Paris Agreement’s long-term temperature goal,
  • Applies allocation methodologies and baseline methodologies that support domestic NDC achievement and contribute to achievement of the Paris Agreement’s long-term temperature goal,
  • Uses CO2-equivalence in reporting and accounting for emissions and removals, fully applying the principles of transparency, accuracy, consistency, comparability and completeness,
  • Uses centrally and publicly accessible infrastructure and systems to collect, track, and share the information necessary for robust and transparent accounting,
  • Ensures incentives to progression and supports all Parties in moving toward economy-wide emission targets,
  • Contributes to quantifiable and predictable financial resources to be used by developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation,
  • Recognizes the importance of capacity building to enable the widest possible participation by Parties under Article 6

Climate Talks Remain Stuck on Markets

11 December 2019 | MADRID| Alden Meyer, director of strategy and policy at Union of Concerned Scientists, has attended every climate meeting since 1991 – before there even was a United Nations Framework Convention on Climate Change (UNFCCC), but he says he’s never been as frustrated as he he’s been at this year’s meeting, the 25th Conference of the Parties (COP25) to the Convention.

“In my almost 30 years in this process, never have I seen the almost total disconnect that we are seeing here in Madrid between what the science requires and the people of the world are demanding on the one hand and what the climate negotiations are delivering in terms of meaningful action on the other,” he said this afternoon as negotiations – which are supposed to be focused on accelerating emission-reductions to avoid catastrophic warming – have instead bogged down over disputes regarding the structure of carbon markets that could, in theory, generate more reductions on lower cost by promoting cross-border cooperation.

The technical phase of negotiations ended late Monday, resulting in a long and contradictory text that was passed up to ministers on Tuesday. Ministers from New Zealand and South Africa have been tasked with forging enough agreement to move forward, but it appears the parties have moved even further apart and not nearer.

Once critical issue has been whether countries can use old offsets generated under the Kyoto Protocol’s Clean Development Mechanism (CDM) to meet their nationally-determined contributions (NDCs) to the Paris Agreement – a practice long advocated primarily by Brazil, but now advocated more vociferously by Australia and a handful of other countries as well. More than half of all NDCs mention the use of carbon markets to achieve their aims, so when the markets issue is stuck, the whole process is stuck.

Other sticky issues are whether to tax international offsets to fund adaptation and how to ensure the protection of human rights.

Several NGOs worried that pressure to create a deal could lead to a faulty mechanism.

“We know there’s a lot of pressure to come out of here with something,” said Yamide Dagnet, a senior associate at the World Resources Institute’s International Climate Action Initiative.

“They will be judged on the quality of the deal,” she added. “And, one of the young activists that we heard this morning said, ‘If you do not know how to fix things, stop breaking them.’ So, we need to make sure that we don’t end them with a broken Article 6.”

Opinion
Climate Finance Must Stop Excluding Indigenous Communities

11 December 2019 | MADRID | Natural Climate Solutions have taken year-end climate talks by storm, with dozens of companies pledging hundreds of millions of dollars to saving forests and planting trees. With the pledges come calls for rigorous carbon accounting to ensure the money is actually generating the benefits people claim – accounting that could, if poorly applied, give short shrift to the forest communities that have long been the most effective guardians of the forest.

Indigenous and traditional communities control one-third of remaining tropical forests. In the Amazon, the largest tropical forest on the globe, they own 210 million hectares (or some 519 million acres). As a direct result of their stewardship, deforestation rates are just 0.2% on average, even less than that of protected areas (1.4%). Their stewardship keeps 51 GT of CO2 from being emitted into the atmosphere, a huge contribution to avoid and revert climate change.

Yet, their efforts to protect the climate, water and biodiversity is carried out at their own expense, a huge sacrifice, and often paying with their own lives, as seen in the killings of two more Guajajara Indian chiefs in the Brazilian Amazon. The United Nations Framework Convention on Climate Change, specifically the REDD‑plus mechanism, has not yet rewarded indigenous people’s stewardship of the worlds’ forests, de facto excluding local communities and their vast territories from directly benefiting from climate finance.

One reason is that these programs are only designed to save forests that are in immediate threat of destruction. In carbon market parlance, a project has to demonstrate “additionality”, meaning it has to show that the carbon money will make the emission reduction possible.

That makes sense in energy – where you can easily calculate the money needed to build, say, a renewable energy plant that replaces a fossil-fuel installation – but it’s not always so clear in forestry. As a result, REDD+ finance ends up being targeted to the known vectors of deforestation, but bypasses the indigenous people who are sustainably managing and protecting the forest further away.

This is a critical mistake, because these people and the forests they protect are still under threat, and have been long before the ascension of Jair Bolsonaro as President of Brazil.

Expand the Reach of REDD+

By sticking to rigid rules of additionality, we ignore the invisible threats to all forests – threats that exist in backroom deals and secret strategy sessions and only become visible after forests have erupted in flame, as those of the Amazon are now, or been laid low by chainsaws.

Many of these forests are now under the protection of indigenous people, and that protection is often backed by law. Article 231 the Brazilian Constitution, for example, guarantees the right of indigenous people to own and manage their territories for their exclusive use, and they have consistently proven themselves to be good stewards of the land.

Indeed, indigenous people have kept deforestation rates in their territories around 0.2 percent, which is far below that of the rest of the country and one-seventh the rate in other protected areas. Their legal right to manage the forest is under threat, and REDD+ finance can be used to bolster those rights.

Look at it as a sort of preventive medicine.

Nearly 180 Companies Embrace Science-Based Targets to Align With Paris Agreement’s 1.5°C Target

11 December 2019 | MADRID | One day after Greta Thunberg implored climate negotiators here to “follow the science” on making climate policy, dozens of companies joined the “Business Ambition for 1.5°C” campaign, pledging in essence to align their practices with a global goal of preventing global temperatures from rising to a level more than 1.5°C (2.7°F) above preindustrial levels. Temperatures have already risen 1.1°C, according to the World Meteorological Organization, and the Intergovernmental Panel on Climate Change says the living ecosystems that support our civilization are already dangerously unstable.

The new signatories brings the total to 177 companies representing more than 5.8 million employees spanning 36 sectors and with headquarters in 36 countries. The companies have a combined market capitalization of over US$2.8 trillion, and represent annual direct emissions equivalent to the annual total CO2 emissions of France.

The companies are committed to setting science-based targets through the Science Based Targets initiative (SBTi), which independently assesses corporate emissions reduction targets in line with what climate scientists say is needed to meet the goals of the Paris Agreement.

The news comes on the occasion of the annual High-level Meeting of Caring for Climate, convened by the UN Global Compact, UN Framework Convention on Climate Change (UNFCCC) and UN Environment. As a high-level stakeholder consultation — with a focus on private sector engagement — the event helps to identify key levers of action necessary to help increase corporate support for enhanced Nationally Determined Contributions and the Sustainable Development Goals.

“We are quickly nearing our last opportunity to be on the right side of history. The climate emergency is already disrupting people, business operations, economies and ecosystems around the world,” said Lise Kingo, CEO and Executive Director of the UN Global Compact, one of the SBTi partners. “As countries prepare to enhance their national climate action plans next year, business leaders have a critical role to play in challenging Governments to urgently match their climate ambitions. We need all businesses to be activists for our only future.”

The latest cohort of companies joining the “Business Ambition for 1.5°C” campaign includes: Abreu Advogados, Aguas Andinas, Ambev, An Post, Auchan Retail Portugal, BanColombia, Beiersdorf, BIAL, Carlsberg Group, Cellnex Telecom, Chanel, CTT – Correios de Portugal, Decathlon, Dr. Reddy’s Laboratories, Dutch-Bangla Pack, Ecolab, EcoVadis, Efacec Power Solutions, EPAL – Empresa Portugesa das Aguas Livres, Europa Mundo Vacaciones, Europcar Mobility Group, Everis Portugal, Givaudan, Green Innovation Group, Grundfos, Henkel, Iberia, Ignitis Group, Infraestruturas de Portugal, International Airlines Group (IAG), Intrepid Travel, Landsec, Lojas Renner, Lundbeck, Multiplex Construction Europe, NOS, Novo Banco, NR Instant Produce, Olam International, Ono Pharmaceutical, Orbia Advance, Orkla, Qalaa Holdings, Red Electrica de España, REN – Redes Energeticas Nacionais, Siemens Gamesa Renewable Energy, Sopra Steria Group, South East Water, Storebrand, Tendam Retail, TenneT Holding, Tesco, The Lux Collective, TMG Automotive, Univar Solutions, Uxua Casa Hotel & Spa, and Yarra Valley Water, amongst others.

Technical Phase of Climate Negotiations Ends With No Agreement on Markets

9 December 2019 | MADRID| UPDATED 23:15 CET | Think of year-end climate negotiations under the United Nations Framework Convention on Climate Change (UNFCCC) as a massive collaborative writing project with nearly 200 writer/editors from different cultures speaking different languages, yet somehow managing to reach agreement on critical issues that will determine the fate of our civilization — or not, as is the case tonight, when negotiators in the first phase of year-end talks failed to reach agreement on the contentious issue of how to implement carbon markets, which are dubbed “cooperative approaches” in the UNFCCC.

“The draft decision text is being forwarded for consideration at CMA 2, recognizing that this text does not represent a consensus among Parties and that further work by the CMA is necessary to finalize the decision,” they wrote on a massive Word document shimmering above the plenary room at the Feria de Madrid, where talks were moved after riots forced them out of this year’s host country, Chile.

Year-end climate negotiations are broken into two phases: a “technical” phase that ends today and a “political” phase that begins tomorrow, when ministers and secretaries arrive for “CMA 2,” which is the second meeting of the Parties to the Paris Agreement.

It’s now up to Chile, as the official host of this year’s meeting, to hammer out an agreement or punt to next year’s talks in Scotland.

The Two Phases and the Breakdown

In the technical phase, negotiators operate within narrow parameters established by their governments to create a clean negotiating text that they pass to higher-level negotiators, who then have more leeway to make compromises.

On Saturday, negotiators operating within a negotiating track called the Subsidiary Body for Scientific and Technological Advice (SBSTA) released draft texts of two key paragraphs related to Article 6, which governs markets — specifically, paragraphs 6.2  and 6.4. The paragraphs were panned as too messy to pass up to higher-level negotiators who comprise the Conference of the Parties (COP). This year’s talks represent the 51st meeting of SBSTA (SBSTA 51) and the 25th meeting of the COP (COP25).

“Everyone is restating their old positions,” said one exasperated negotiator, speaking on condition of anonymity. “It doesn’t look good; too many red lines have been crossed.”

Some of the issues — such as how prescriptive the rules for social safeguards should be — were decades old. Several countries, mostly in the developing world, have long argued against strict human rights rules, which they say merely duplicate existing protections and will overload the mechanism by imposing a cumbersome bureaucracy. Other countries, mostly in the developed world, argue such fears are overblown.

Then there are newer issues that emerged with the advent of the Paris Agreement, and the list is intimidatingly long: how to deal with countries that choose to measure their environmental progress in something other than greenhouse-gas emissions (such as, for example, new kilowatt-hours of renewable energy); how to account for internationally-transferred emission-reduction units; whether countries can use international offsets to meet their existing climate action plans (technically called “NDCs”, or “Nationally-Determined Contributions); whether to tax internationally-transferred emission reductions to finance adaptation; how to recognize carbon sinks; how to account for emission-reductions that pass into the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA, an emerging compliance system for offsetting emissions from international air traffic); and — most contentious of all — what to do with old offsets generated under the Kyoto Protocol’s Clean Development Mechanism (CDM) and whether to allow some double-accounting for developing countries in the early phases of the new mechanism.

If no agreement is reached, markets can theoretically develop under the Katowice Agreement, but developing countries would likely lack the bandwidth to participate or to influence what wealthier nations trade with each other.

Markets in Limbo

That disconcertingly long list explains why the issue of carbon markets is the only major part of the Paris Agreement not finalized at COP24 in Katowice, Poland. Markets are enshrined in Article 6, which doesn’t actually use the word “markets”. Instead, it says countries can use internationally-transferred emission reductions to promote activities that cut emissions deeper than they pledged in their climate action plans (NDCs, for “nationally-determined contributions”), and it lays out two paths for creating these offsets, or “ITMOs” (Internationally-Transferred Mitigation Outcomes).

The first path, articulated in Article 6.2, lets countries generate ITMOs and link markets internationally, using UN-sanctioned rules of carbon accounting. It has already led to a proliferation of cross-border carbon-trading initiatives around the world, and these will continue even without inclusion in the rule book, with countries free to develop their own guidance on issues that the rulebook doesn’t address.

The second path, explained in Article 6.4 and championed by Brazil, creates a centralized mechanism within the UNFCCC called the Sustainable Development Mechanism (SDM). This is where the contentious issue of double-counting arose after Brazil said it wanted to exempt developing countries from existing rules that prevent double-counting by requiring countries that sell offsets to then deduce the emission-reductions from their own carbon inventories. Brazil says it will develop its own measure to prove they don’t double count, but other countries are skeptical.

With SBSTA failing to agree on a text, the COP Presidency, in this case Chile, will have the power to intervene and facilitate discussions towards a deal.

 

Voluntary Carbon Volume Hits Seven Year High on Demand for Natural Climate Solutions

5 December 2019 | MADRID |

Airlines, oil companies, and individuals are using voluntary carbon markets to achieve net reductions in greenhouse gas emissions at levels not seen in seven years, according to Financing Emissions Reductions for the Future: State of the Voluntary Carbon Markets 2019, which was published by Forest Trends’ Ecosystem Marketplace initiative today at year-end climate talks (COP25) in Madrid, Spain.

“Companies feel an urgency to reduce their emissions, but they can’t eliminate them internally overnight,” said Michael Jenkins, President and CEO of Forest Trends. “Many are now using voluntary carbon markets to offset those emissions they can’t eliminate until they can transition to new technologies.”

This is the 12th edition of the report, which Ecosystem Marketplace first began publishing in 2007. It draws on extensive market data gathered from the years 2017 and 2018, coupled with interviews to interpret findings and identify trends in the current calendar year.

For 2018, the report documents transactions equivalent to 98.4 million metric tons of carbon dioxide (MtCO2e) for a total market value of $295.7 million. This represents a 52.6% increase in volume and a 48.5% increase in value over 2016, which is the last year an annual survey was conducted.

Market participants told Ecosystem Marketplace that market growth has accelerated even further in 2019, although full market-wide data for 2019 will not be available until 2020.

The increase in transacted volume was driven by offsets associated with “nature-based solutions,” which are projects that reduce emissions by improving management of forests, farms, and fields. Volume in the Forestry and Land Use sector, for example, grew 264%, from 13.9 MtCO2e in 2016 to 50.7 MtCO2e in 2018, while volume in all other offset types grew just 21%.

Prices remained relatively low as developers worked through inventory that had been accumulated in previous years, although several market participants reported rising prices towards the end of 2019.

Within the Forestry and Land Use sector, volume from offsets associated with REDD+ (Reducing Emissions from Deforestation and Degradation, plus enhancement of carbon stocks) increased 187%, from 10.6 MtCO2e in 2016 to 30.5 MtO2e in 2018, while volume of offsets associated with afforestation/reforestation (A/R) increased 342%, from less than 2 MtCO2e in 2016 to 8.4 MtCO2e in 2018. Geographically, new REDD+ volume was concentrated in Peru, which accounted for 19.7 MtCO2e of the increase. New A/R volume was more evenly distributed around the world.

In interviews, market participants credited the increase to a growing desire on the part of consumer-facing companies to exceed regulatory climate requirements, rather than a desire to acquire inventory for compliance markets such as the International Civil Aviation Organization’s (ICAO) emissions trading program, CORSIA. CORSIA becomes active in 2021 but will not reach full-scale operation until 2027.

Instead, interviewees repeatedly stressed the emergence of major voluntary buyers, such as Shell, which has committed to invest $300 million in offsets associated with nature based solutions from mid-2019 through mid-2022. British Airways and Air France, meanwhile, have announced they will offset emissions from all domestic flights beginning next year, while EasyJet announced in November that it will offset all emissions from its use of jet fuels immediately. EasyJet has confirmed to Ecosystem Marketplace that it expects to purchase 7.5 MtCO2e through September 2020

Photo by David Clode on Unsplash

Bright REDD Spot in Otherwise Dismal Copenhagen Accord

“We recognize the crucial role of reducing emission from deforestation and forest degradation and the need to enhance removals of greenhouse gas emission by forests and agree on the need to provide positive incentives to such actions through the immediate establishment of a mechanism including REDD-plus, to enable the mobilization of financial resources from developed countries.”

19 December   2009 | COPENHAGEN | That’s the good news on REDD from the otherwise disappointing Copenhagen Accord, which was recognized in the wee hours of Saturday morning by delegates to COP 15 in Copenhagen after being put forward by the US, China, India and South Africa and supported by the Coalition of Rainforest Nations but shunned by many island states and African nations.

US President Barack Obama framed the deal as a step towards building a bridge between the developed and developing worlds, and EU President José Barroso complained that the G-77 was placing too much emphasis on money and not enough on mitigation results.   At one point, he said that the EU had offered to reduce emissions by 80% by 2050 if the developing world came on board, but the offer was shot down.

The Accord does not carry the weight of a Protocol, but rather hopes to act as a stepping stone to a meeting next year in Mexico City, Mexico.

The specific REDD policy text has not yet been posted in electronic form, but the methodological text has been posted and looks to be final.

Negotiators on the policy side say they’ve come close to resolving the debate over national vs. sub-national accounting – specifically, in the relevant text, they have removed the brackets around “national” accounting but kept them around “sub-national”, and have removed the “s” from references to national emissions levels in the paragraph on accounting.

The most recent text I saw, which was around 2am Saturday morning and probably pretty close to being done, failed to include two provisions that other sources had told me would be included – namely, a specific reference to deforestation targets, and a specific reference to private-sector financing mechanisms – although the latter is between the lines throughout the text.

The US apparently managed to have the word “development” inserted into the section on technology transfer, so it now reads “technology development and transfer”.  

If a big agreement is reached in Mexico, the REDD text will suddenly burst to life within that.  

 

 

 

Six Key Lessons as Greenhouse-Gas Emissions Hit All-Time High

This story first appeared on the WRI blog.

4 December 2019 | MADRID | Global carbon dioxide emissions from fossil fuels are on track to again climb to a record high in 2019, according to a new report from the Global Carbon Project, putting the world at risk of catastrophic climate change due to these heat-trapping gases. This is further evidence that the plateau in emissions growth between 2014 and 2016 was short-lived: emissions from fossil fuels grew 1.5% in 2017, 2.1% in 2018 and are projected to grow another 0.6% in 2019. This growth is at odds with the deep cuts urgently needed to respond to the climate emergency.

The alarming news was released as almost 200 nations gathered in Madrid, Spain to finalize rules of the Paris Agreement on climate change and prepare to enhance their national climate commitments in 2020.

Here are six takeaways from the report and accompanying analyses, which offer deeper insights into the data:

1. Another Year of Growing Emissions

For the first time, fossil fuel carbon emissions hit 10 gigatons per year in 2018 (or, just under 37 gigatons carbon dioxide), more than double the level in the 1970s.
In developed countries where emissions have already peaked, carbon dioxide emissions aren’t dropping quickly enough to offset emissions growth elsewhere. Emissions in 2019 are expected to decline in both the European Union and United States by 1.7%, as India’s emissions are expected to rise 1.8% (notably lower than the past five-year growth rate of 5.1%), China’s are expected to rise 2.6% and emissions in the rest of the world are expected to rise 0.5%.

Average per capita emissions were 4.8 tonnes of fossil fuel carbon dioxide per person last year. This number was considerably higher in Australia (16.9 tonnes per person), China (7.0 tonnes per person), the EU (6.7) and the United States (16.6). Notably, China’s per capita carbon dioxide emissions are now higher than those of the EU (although historically they were not), while India’s per capita emissions (2.0 tonnes per person) are about one eighth of those of the U.S.

2. Oceans and Land are Soaking Up More Carbon Dioxide

Land and oceans – our carbon sinks – are continuing to soak up carbon dioxide at a rate that tracks the rise of carbon dioxide concentration in the atmosphere, partly compensating for the growth in emissions. The global ocean has taken in 2.5 gigatons per year in the last decade, more than double what it did in the 1960s. Lands took in 3.2 gigatons per year in the last decade, more than 1.5 times the rate in the 1970s.

But our ocean and land sinks could be compromised by future warming, which could limit the amount of carbon dioxide they absorb, making global temperatures rise even faster than they are now.

3. Coal Is on a Clear Decline, but Still Dominates Emissions

Coal is the largest contributor of fossil fuel carbon dioxide emissions, making up 42% of the global total. However, as renewable or lower-emissions power sources become more economically competitive and more countries turn away from coal due to its impact on climate and health, there are signs that coal is clearly in decline. U.S. generation from coal is projected to decline 11% from 2018 to 2019 to a level that has not been witnessed for more than 50 years, about half of what its peak was in 2005. In Europe, coal-based emissions declined 10% in 2019. And in the UK, coal has dropped from 42% in 2012 to only 5% of electricity generation in 2018.

At the same time, coal use is increasing elsewhere to meet energy demand, although more slowly than in the past. In China, coal use is expected to increase by 0.8% this year, with a decline of coal use in the power sector and lower growth in industrial production. In India, carbon dioxide emissions from coal are anticipated to grow by 1.8% this year, less than half the average growth rate of the last five years.

4. Natural Gas, the Fastest-growing Fossil Fuel, Doesn’t Always Replace Coal

Globally, the use of natural gas rose an average of 2.6% per year over the past five years and its emissions are expected to increase 2.5% in 2019. Even with this rapid growth, it contributes around half the emissions of coal.

Previously dependent on pipelines for transport, natural gas markets are becoming more global as liquified natural gas (LNG) markets grow – LNG trade is up 10% in 2018 alone. This is reducing regional price differences and driving demand where prices are dropping, mainly in Asia.

While natural gas is sometimes considered a bridge fuel between coal and renewables because it emits about half the carbon dioxide of coal, the investments being made now in natural gas infrastructure will lock in its use and its emissions for decades to come, potentially delaying the shift to lower carbon sources. For example, in 2019, the U.S. Federal Energy Regulatory Commission has approved 11 LNG export projects.

Most critical to watch is whether natural gas is replacing or adding to coal use. So far, replacement appears to be happening in some major markets, like the United States, but not in others, like Japan, where it is substituting for lost nuclear power.

5. Oil Is on the Rise, Driven by Increasing Demand for Transport

As with natural gas, oil use also continues to increase globally, up an average of 1.9% per year over the last decade and making up just over a third of global fossil fuel emissions. Around half of oil is used in land transport, with demand rising in developing and many developed countries. In the United States there is already nearly one vehicle per person, while in many developing markets this ratio is far lower, with one vehicle for every six people in China and one for every 40 people in India. Projections for increasing private vehicle ownership in China, India and other developing markets suggest demand for oil will continue to grow for years to come.

Airline travel, while representing only 8% of emissions from global oil use, is also growing. The number of passenger trips is up 7% per year on average from 2013 through 2018 and shows potential to continue, especially in developing countries where per capita use of airline travel remains comparatively low.

6. Solutions Exist

A number of approaches can be used to decarbonize economies, including replacing fossil fuels with renewables and setting fuel efficiency standards. As at least 18 countries have shown, national emissions levels can fall as economies grow. What’s needed is the commitment by more countries to do so and transform their economies for rapid decarbonization.

The COP25 Opportunity

This month’s international climate conference, COP25, in Madrid, provides a key opportunity for countries to signal that they will increase the ambition of their national climate commitments, known as nationally determined contributions or NDCs. Sixty-eight already have indicated they will enhance their NDCs in 2020, but they represent only 8% of global emissions. Major emitters need to step forward and lead the world.

While this year’s report indicates a lower growth rate than the past few years, even zero growth in emissions is not enough. Furthermore, on top of rising emissions during the past few years, preliminary data estimates for 2020 suggest that emissions will continue to increase next year. We need to actively bend the emissions curve downwards to have any hope of being on track for a world that is well below 2 degrees C (3.6 degrees F) and ideally less than 1.5 degrees C (2.7 degrees F) warmer than before the Industrial Revolution. Only by getting emissions growth below zero can we realistically expect to avoid the most severe impacts of climate change.

Shades of REDD+:
Should Forest Carbon Credits be Eligible for CORSIA?

3 December 2019 | Forest carbon credits have long been perceived as riskier and less robust than carbon credits from other sectors. When operating details of the Kyoto Protocol’s Clean Development Mechanism (CDM) were negotiated from 2001-2003, many voiced concerns about forest carbon credits and their high risk of reversals, potential to displace emissions, and the difficulties in accurately quantifying emission reductions. As a result, only limited types of forest activities became eligible under the CDM. Forests were also kept out of the European Union’s Emission Trading Scheme.

Nearly two decades on, it is worthwhile to reconsider the question of whether or not forest mitigation could be ready for carbon markets. The question is back on the table as the International Civil Aviation Organization (ICAO) sets up a scheme for reducing emissions from international air travel.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is an emissions mitigation scheme covering the global aviation industry. Among other things, it will require airlines to reduce or offset emissions from international flights to keep net emissions at 2020 levels. A technical body set up by ICAO is currently evaluating which greenhouse gas (GHG) “standards” will be eligible to provide carbon credits for offsetting purposes.

To inform decision makers for CORSIA, we have analyzed the most significant GHG standards that issue forest carbon credits, testing them against CORSIA’s eligibility criteria, including Verra’s Verified Carbon Standard (VCS), the World Bank’s Forest Carbon Partnership Facility (FCPF) Carbon Fund, and the Warsaw Framework for REDD+. We focused on five key criteria that directly impact the GHG integrity of carbon credits: reference level or baseline establishment, additionality, quantification, permanence, and leakage management. You can find our assessment here.

We conclude that forest projects, or jurisdictional REDD+ programs, should not all be thrown into one basket: just as in other sectors, certain project types are of higher quality than others. And certain GHG standards are better tailored to manage and regulate forest-related risks than others.

Setting a crediting baseline:  A crediting baseline represents a benchmark level of emissions that a project or program needs to outperform in order to issue carbon credits. For many types of mitigation activities, setting reliable baselines is the most important factor in generating robust carbon credits, and is also the most challenging task. As a counterfactual scenario, it requires making assumptions about expected business-as-usual future trends.

This is true for both forest and non-forest projects. Setting baselines for avoided deforestation projects tends to be more challenging than setting baselines for other project types (including other forest project types). The drivers of deforestation and pressures on forests are particularly hard to predict. Our analysis suggests that current methodologies for avoided deforestation baselines can sometimes (but not always) lead to hot air. New approaches to “nest” REDD+ projects into a jurisdictional crediting baseline can help promote more robust crediting levels. Project-based programs, such as the VCS, are in the process of developing nesting rules.

Jurisdictional forest standards also differ in how they determine reference levels. The FCPF Carbon Fund mandates the use of a historical and conservative reference level. The Warsaw Framework for REDD+ offers little guidance on how to set a reference level, resulting in high variability in the quality of forest reference levels. It also does not have requirements for baseline revisions, allowing countries to decide when they wish to revise their forest reference levels.

Ensuring additionality:  Determining additionality is closely linked to the baseline setting. Most GHG standards require the application of additionality tests that confirm a project is not already required by law, is not financially viable without income from carbon crediting, or common practice.

Here, forest carbon projects usually fare better than other types of projects. Because forest protection in many tropical countries is weak, budgets for forest protection small, and economic incentives for deforestation abound, many avoided deforestation projects are clearly additional. In the case of jurisdictional programs, additionality is often assumed to be reflected in a conservative reference level—although VCS Jurisdictional and Nested REDD (JNR) and the FCPF Carbon Fund have further requirements, such as demonstrating new policies or actions have taken place.

Conversely, for certain types of renewable energy projects located in emerging economies (e.g. large solar and wind projects), financial, technological and political barriers have significantly reduced. As these projects also generate revenues from sources other than the sale of carbon credits, demonstrating additionality is much more challenging. Gaming of additionality with dubious rates of return was an issue for some of these projects. However, many GHG standards have worked towards closing loopholes for non-additional projects.

Quantification and verification:  Quantification, monitoring, reporting and verification is needed to measure the number of carbon credits that a project or program can have issued. For non-forest projects, GHG standards tend to require conservative approaches in estimating carbon credits, setting limits on how much uncertainty is allowed and mandating third-party verification.

The relatively greater complexity of estimating GHGs from forests means, in some instances, higher uncertainty in quantifying carbon credits. Improving the accuracy of measurements in the case of forest projects may be achieved through, for example, increasing the number of forest plots measured or using higher-quality satellite data. This is, however, much more challenging for larger-scale jurisdictional programs and not always cost-effective or even possible.

Our analysis suggests there is a need to carefully scrutinize forest carbon methodologies to ensure a robust estimation of uncertainty. It also questions the relaxed approach of several GHG standards that appear to allow high uncertainty when crediting jurisdictional forest carbon programs.

Ensuring permanence:  There is always the risk that mitigation benefits of a project or program are reversed (e.g. a restored forest burns or is cleared for agriculture). Forest carbon credits carry a higher potential risk of non-permanence than non-forest credits. Most GHG standards make use of buffer accounts to manage this risk.

The VCS requires forest projects or programs to deposit a certain quantity of credits into a pooled buffer account, which is to be used to offset any reversal. The number of credits to be placed in reserve is based on an analysis of the likelihood of a reversal, specific to each project or program. To date, the buffer approach has been successful—there have been few reversals and there is a glut of reserve carbon credits in buffer pools. Verra suggests even reversals that may occur due to the recent Amazon fires would be well covered by the buffer.

However, there is no experience yet on the effectiveness of buffer reserves for jurisdictional crediting. The necessarily smaller number of jurisdictional programs (relative to the high number and variability of projects) may constrain effective risk-balancing. Furthermore, other GHG standards, like the Warsaw Framework for REDD+, do not yet offer any particular approach to deal with non-permanence, merely stating that REDD+ should promote and support actions to address the risk of reversals.

Accounting for leakage:  Leakage describes the displacement of emissions (e.g. a forest is protected in the project area but cleared somewhere else). Almost every mitigation activity carries with it a risk of leakage. Forest project activities have varying risks of leakage. Some have inherently low leakage risk, such as forest management projects that do not reduce the amount of production. By contrast, REDD projects that address highly mobile deforestation agents (e.g. commercial agriculture) causing forest loss can have high leakage risks.

All project-based programs require leakage prevention in project design, quantification of residual leakage, and deduction from overall emission reductions once the project is up and running. The FCPF Carbon Fund or the Warsaw Framework for REDD+ do not quantify or deduct for leakage risks, with the argument that larger accounting areas should not have to do so. By contrast, the VCS does require such accounting for leakage, even for their jurisdictional programs.

Conclusions

For offsets to be market-ready, a tonne of GHG reduction from forestry mitigation must be as good as a tonne of GHG reduction from any other sector. GHG standards need to ensure a credible baseline, quantify and deduct for residual leakage, have in place a robust buffer reserve, guarantee permanence of emission reductions and include provisions for robust quantification of emission reductions.

While stand-alone avoided deforestation projects are prone to baseline inflation, robust carbon credits could be expected to come from nested REDD+ projects – where private-sector led projects are embedded into a conservative jurisdictional program. Forest management projects and tree planting projects are also good options to deliver credible carbon credits. Jurisdictional programs could also deliver robust carbon credits – if (and this is an important ‘if’) – a set of adjustments are made; such as to guarantee necessary corrections for unavoidable leakage or estimation errors.

We are hoping for a careful yet positive decision with regards to forests under CORSIA. It would be a pity if forests were left out yet again. They offer an important piece of the solution to climate change, and can also play an important role under CORSIA.

Photo by Miguel Ángel Sanz on Unsplash

How You Can Participate in this Series

This is the first in a continuing series articles focused on REDD+. We invite you to post comments or propose your own submissions as the series evolves.

You can propose submissions by contacting Steve Zwick, Managing Editor of Ecosystem Marketplace, at SZwick@forest-trends.org. Please write “REDD+ Series Submission” in the subject header.

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World War Zero: John Kerry’s Effort to Achieve Zero Net Emissions by 2050

1 December 2019 | As year-end climate talks kick off in Madrid, Spain, former US Secretary of State John Kerry is launching an initiative called “World War Zero,” which brings moderate Republicans like former governors Schwarzenegger of California and John Kasich of Ohio together with former Democratic presidents Bill Clinton and Jimmy Carter and Hollywood actors like Leonardo DiCaprio and Ashton Kutcher to engage more Americans in the global climate challenge.

The initiative launched quietly on Sunday, one day before the 25th Conference of the Parties (COP25) to the United Nations Framework Convention on Climate Change (UNFCCC) kicks off in Madrid and just a few days after the UN’s Emissions Gap Report showed that current pledges and progress are nowhere near deep enough to prevent global temperatures from rising to a level 1.5°C (2.7°F) above preindustrial levels.

“We’re going to try to reach millions of people, Americans and people in other parts of the world, in order to mobilize an army of people who are going to demand action now on climate change sufficient to meet the challenge,” Kerry told The New York Times, which broke the story.

As Emissions Rise, Cost of Fixing Climate Soars. Now $2-4 Trillion Per Year

26 November 2019 | One week before negotiators from around the world are to gather in Madrid for a year-end summit to beef up commitments under the Paris Climate Agreement, the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) says decades of foot-dragging have increased carbon dioxide concentrations 50 percent above where they were before the Industrial Revolution and raised the cost of meeting the Agreement’s 1.5°C target to somewhere between US$1.6 trillion and US$3.8 trillion per year.

The lower figure is what it will cost if we act now, while the higher cost is what it will cost if continue to move slowly.

Tragically, moving slowly is all we’ve been doing , according to UNEP’s latest annual Emissions Gap Report, which draws on WMO data and is published on the eve of global talks to identify the gap between current pledges and actions and where we need to be.

The WMO’s Greenhouse Gas Bulletin found the global average concentration of CO2 had reached 407.8 parts per million in 2018, which is 50 percent higher than in 1750.

“It is worth recalling that the last time the Earth experienced a comparable concentration of carbon dioxide was three to five million years ago,” said WMO Secretary General Petteri Taalas . “Back then, the temperature was two to three degrees Celsius warmer, and sea level was 10 to 20 meters higher than now.”

Carbon dioxide concentrations are now higher than they’ve been for over 3 million years. Source: World Meteorological Organization

In terms of heat trapped – or “warming potential” – the increase from methane represents more than a doubling from pre-industrial levels. Methane comes from fossil fuels, but also ruminants like cows and sheep, as well as rice paddies and melting permafrost. Because of its higher warming potential, methane now accounts for 17 of global warming.

Total greenhouse-gas emissions is 55.3 billion metric tons of CO2 (“GtCO2e” for “gigatonnes of carbon dioxide equivalent”) in 2018, which is 32 GtCO2e per year higher than the maximum we can afford to be averaging in just ten years if we’re to meet the 1.5°C. That translates into a drop of 7.6 percent annually over the next decade.

A gentler cut of 2.7 percent might help us meet the Paris Agreement’s initial 2°C goal, but global scientific consensus, in the form of detailed summaries compiled by the Intergovernmental Panel on Climate Change (IPCC), tells us that goal won’t avoid catastrophe.

Economists agree that the most effective way to reduce emissions is to put a price on carbon, and the World Bank recently found that nearly 20 percent of global emissions – or 11 GtCO2e – are now covered by carbon markets. Ecosystem Marketplace is slated to publish its latest State of Voluntary Carbon Markets report in Madrid next week, and the report is expected to show steep growth in those markets as well.

A staggering 78 percent of all emissions come from the Group of Twenty Industrialized Nations (G-20), but only five of those countries have committed to a timeline for net-zero emissions.

Shades of REDD+
Nesting: A Good or Bad Piece of Swiss Cheese?

24 November 2019 | There was a time when people thought that forests were the low-hanging fruit of the climate challenge, and that reducing emissions from deforestation was fast, easy, and cheap.  No one thinks that anymore. One particularly significant challenge of tackling emissions from deforestation is the large, diverse, and geographically diffuse set of actors that drive forest loss. Because of this, as we saw in the previous installment of this series (see Bridging the National vs. Project Divide), achieving large-scale mitigation requires collective action from multiple stakeholders undertaking different activities at different levels.

Over the past decade, donor governments have paid for over 330 million tons of CO2 “results” from forest countries.  Most of this (over 260 million tons) have been for Brazil’s reductions in emissions from deforestation, with the remaining purchases of around 70  million tons from six other countries.  Such results-based payments have been for government-led national (or subnational) programs designed to reduce deforestation, with payments contingent on quantified performance. More recently, purchases of project-based forest carbon credits by the private sector have been rising rapidly (see “Issuances of Forest-related Verified Carbon Units,” below), sourced from a wide range of countries.  New pledges by corporate players to offset emissions using ‘nature-based’ credits suggest this market will continue to grow.

Therefore, it would seem encouraging that multiple sources of finance (public and private) at multiple scales (from national to project) are available to provide incentives to a range of actors needed to tackle deforestation.

The Challenge:  Simultaneous Crediting by Projects and Jurisdictions

Problems, however, have arisen when projects are selling forest carbon credits at the same time governments are trying to access results-based finance from programs such as the Green Climate Fund or the Forest Carbon Partnership Facility’s Carbon Fund.  Donors will not “pay twice” for the same emission reduction, so before getting paid for mitigation results, forest country governments are required to subtract credits sold by projects from their estimated jurisdictional performance.  In some cases, once a government subtracts project credits, there is nothing left for the government to claim—reducing the “incentive” for government action.

This happens for a variety of reasons.  Sometimes it is because the government has not actually taken sufficient action to reduce deforestation.  In other cases, it is because national systems to measure GHG performance are substantially different than data and methods used by projects.  In order to ensure that these two incentive systems—government-to-government results-based payments and private sector purchase of project-scale carbon credits—work together, countries must develop “nested systems”.

The core objective of a nested system is to allow a variety of stakeholders to take mitigation actions and receive a “fair share” of rewards for their efforts.  It involves developing GHG measurement and monitoring systems at project, subnational and national scales that are aligned and setting baselines that promote equity among actors—allowing each to receive finance in proportion to their mitigation contribution.

The Complaint:  Nesting Creates Swiss Cheese

Some complain, however, that nested programs create a “swiss cheese” effect whereby project (or subnational) accounting creates a complexity within a country—in effect, creating multiple accounting areas operating simultaneously.  The figure below illustrates this scenario on a slice of Emmental cheese.  Within a country, some projects may “buy in” to the national (or subnational) program, transferring the Emission Reductions (ERs) they achieve to the government in return for promised benefits.  Others, however, may have the right or wish to keep their ERs and find their own buyers (and reap the financial reward).  Creating an operational accounting framework for this situation requires a robust carbon accounting framework, transparency and alignment of data, reliable government institutions, clear regulations that provide legal security for those operating projects, and a functioning registry.

Illustration of a Nested System

Those who argue against the swiss cheese often promote one of two ideas: (1) carbon crediting can only occur at the national (or subnational) level; or (2) projects may only issue credits that, in aggregate, fall at or below national performance, as measured by the government. The unintended consequence of the first approach is that REDD+ country governments may be tempted to nationalize carbon rights, ensuring that only one national agency would be recipient of result-based payments. Projects, in such countries, would only be rewarded for their mitigation contribution if—after paying all the costs of the national mitigation program—there is something left to distribute.  In the second case, project crediting would be dependent on national performance—providing little predictability for a ‘return on investment’.  Both cases reduce the incentive for local actors and dry up private investment.

Benefits of Nesting

Despite their complexity, nested systems may, in some countries, be more likely to mobilize collective actions and achieve large-scale mitigation than a pure national approach, i.e. where only national governments have access to result-based payments. This is particularly true in contexts where governmental institutions do not have the resources to establish and enforce environmental policies and regulations.

Nested systems may also be necessary where the legal right to forest carbon should rest with those who own or have the management right to the forest.  Results-based payments to national governments for ERs achieved at the national level may generate conflicts with stakeholders who claim rights to ERs accrued on a variety of lands—including private lands, lands of indigenous people, lands of peasant communities, lands granted in concessions, and lands that are under the jurisdiction of subnational governments. In other words, a national government monetizing all the country’s ERs, regardless of the legal condition of the lands on which they were accrued, may be controversial or even legally untenable in some countries.

Nesting overcomes these problems by allowing carbon finance to go directly to landowners or to those entities to whom landowners have transferred the right to develop and trade ERs on their behalf.  It enables a country to leverage the capacities of its entire society to take mitigation actions. It builds on the standpoint that no single stakeholder group should have the exclusive right to access result-based payments and carbon markets, and no stakeholder should be relegated to the role of becoming, at best, a beneficiary of a “benefit distribution scheme” designed by another more privileged group.

While governments are uniquely responsible for accounting of all ERs generated within the national territory, and for achievement of the country’s nationally determined contribution (NDC) under the Paris Climate Agreement, they can enable projects or subnational crediting.  Many countries may, in fact, see this as the most promising pathway to achieving large-scale mitigation.

Nesting also sets up a framework that enables private capital to flow into mitigation actions.  Where a government has little funding available for forest protection, it may create a policy to drive investment in forest protection activities to ‘hotspot’ areas of deforestation, where innovative approaches to forest conservation can be tested and developed beyond the scope and capability of governmental action.  If done right, nesting could allow a country to benefit from the emerging and increasing finance available from companies—a cost savings for the government—without disturbing the government’s ability to also access results-based payments at national (or subnational) scale from programs such as the Green Climate Fund or other donor government funded offers.

For many countries, it is unimaginable that the national government alone, with limited human and financial resources, can successfully address deforestation and forest degradation at the scale required to achieve meaningful emission reductions. The proactive contribution of subnational jurisdictions as well as the material contribution of civil society and the private sector through REDD+ projects are of critical importance for many countries to successfully reduce deforestation and forest degradation.

Emmental cheese is known for its holes but also for its good quality.  The price of the slice of cheese is determined by its weight, not by its volume.  This, perhaps, is an allegory for a nested system.  The presence of “gaps”, or independent projects generating Emission Reductions (that need to be subtracted from the national accounting), need not to imply a loss of environmental integrity or quality of the national program—just as holes in the cheese do not imply poor quality of the product.

Lucio Pedroni is President and CEO of Carbon Decisions International and a leading authority on forest carbon accounting methodologies.

Donna Lee is an independent consultant and serves as an advisor to governments, multilateral organizations, private companies and non-profit organizations; prior to this, she was a State Department official and represented the U.S. in climate change negotiations for several years. She considers herself a proud member of the “REDD+ community” since 2007.

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EasyJet Says it’s Now Carbon Neutral

20 November 2019 | UK discount airline EasyJet says it has offset all emissions from its use of fossil fuels, effective yesterday – and it did so at a cost of just £25m for the next financial year by purchasing carbon offsets generated by saving endangered forest (REDD+) and planting trees (afforestation/reforestation).

The offsets come from 17 different projects through a three-year forward contract for less than $4 per tonne of CO2, and CEO Johan Lundgren said the airline was looking to develop its own projects after that.

The announcement not only highlights the low cost of reducing emissions, but one-ups rivals like British Airways and Air France – both of which have vowed to offset emissions from domestic flights next year. BA has also pledged to be carbon neutral across all flights, but not until 2050.

Lundgren emphasized that offsetting was not a permanent solution, but a stopgap measure that can deliver steep reductions now, with with the technology that already exists.

“We recognize that offsetting is only an interim measure,” he said. “Aviation will have to reinvent itself as quickly as it can.”

Towards that end, he added, the airline has signed a memorandum of understanding with Airbus to co-develop hybrid electric planes for short-haul European flights.

The move comes amid growing enthusiasm for both voluntary offsetting, which involves using carbon offsets to reduce emisisons beyond what can be done technologically, and Natural Climate Solutions (NCS), which reduce emissions by financing improved management of forests, farms, and natural ecosystems. Such strategies have been integral to voluntary carbon markets since their inception in 1989, but they have gained in popularity over the past two years, according to Ecosystem Marketplace’s latest “State of Voluntary Carbon Markets Report” which is due to be published at year-end climate talks in Madrid.

The move comes as airlines prepare for new rules that require airlines to cap emissions from international passenger flights at 2020 levels, beginning in 2021 – first on a voluntary basis that allows countries to opt in, and then on a mandatory basis from 2027 onwards. Under the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), airlines can meet their obligations by purchasing ICAO-recognized offsets, but it’s not yet clear what those offsets will be.

Emissions from all passenger flights topped the equivalent of 900 million metric tons of carbon dioxide in 2018.

Securing Climate Benefit: a Guide to Using Carbon Offsets

20 November 2019 | The world has finally awakened to the enormity of the climate challenge, and many people are choosing to drive less, fly less, and eat more veggies.

We can’t, unfortunately, eliminate all of our emissions, but we can offset those we can’t eliminate by financing programs that pull greenhouse gasses out of the atmosphere by planting trees or saving endangered forests, among other things. And to do that, we purchase carbon offsets — as you can see in this chart here:

But how do we know that the offsets we buy actually reduce emissions? That’s the question that the Stockholm Environment Institute and the GHG Management Institute set out to answer in a handy little flier called “Securing Climate Benefit: A Guide to Using Carbon Offsets”, which is available for download here.